The Rs 55,80,000 crore question
Blame it on tradition or on its popularity as a hedge against inflation, but Indians are diverting a large portion of their savings to gold. This has reduced their financial resources for investment and added to the country’s problems, including twin deficit woes. It is also a major reason for high interest rates, low growth rate and high inflation.
India’s entire current account deficit of $57 billion (net of software exports and remittances) in the fiscal year 2012 would have turned positive if we had not imported gold worth $62 billion. The saga of gold imports has been continuing for many decades, with imports of gold, silver and precious stones making up the entire current account deficit. This means India is exporting its capital to countries producing gold, silver and precious stones. In return, we get a weak rupee, lower credit rating, higher dependence on foreign inflows, lower investments, lower GDP growth.
India’s obsession with the yellow metal has made us the largest holder of gold in the world. According to an official estimate, we hold about 18,000 tonnes of gold, importing more than 700-800 tonnes every year. The actual amount we hold is likely to be much more as gold stocked in temple vaults and private lockers is probably not accounted for. At today’s market price, the value of this gold is Rs 55,80,000 crore, which is almost 85 per cent of India’s stock market capitalisation, or just a little less than our