The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.
NEW DELHI — In the glinting showroom of the Gem Palace in the city of Jaipur, Sanjay Kasliwal surveys his family business: strings of rubies, pearls the size of grapes, collars of emeralds and, everywhere, bright yellow gold.
The Gem Palace has supplied princes, prime ministers, socialites and no small number of families preparing for weddings, for hundreds of years. But in the past decade, the price of gold has surged to unprecedented heights – fetching close to $1,700 (U.S.) an ounce on Wednesday. Yet Mr. Kasliwal’s business has not faltered.
“People have a budget, but they’ll still put it in gold,” the jeweller said. “If the price goes up, they buy 490 grams instead of 500 grams, that’s all. The Indian hunger for gold, you can’t change that.”
That hunger for gold has also warped the country’s economy. The Indian government is growing increasingly alarmed about a current account deficit in the July-to-September quarter that accounted for a record 5.4 per cent of gross domestic product. This week it raised taxes on gold imports in an attempt to curb a shopping habit that goes back centuries.
That will be no easy task. Gold purchases make a lot of sense for Indians. Inflation has run at or near 10 per cent annually, while the best rate on a savings product from a bank returns 8 per cent. The stock market has had returns far below that in recent years.
The only other sensible place to put savings, then, is to buy land, but property prices are extremely high; buying and selling land is also time-consuming and complex. Rural residents who need some place to put their savings after harvest often lack access to financing to buy land, and may have only small sums to invest.
“Growing at 20 per cent for the last 10 years – the obvious choice is gold,” said Jayadeva Prasad Moleyar, an economist in Mangalore who tracks gold consumption.
In addition, a huge amount of the money being invested in India is what is known as “black” money – earned in unofficial transactions and not declared for taxes. By some estimates, this covers as much a 25 per cent of transactions. And gold is the best place to put that cash, too.
Beyond the economic rationale, gold has a cherished role as an auspicious substance across the diverse cultures of India. “If there is a wedding, the father-in-law is not going to give the bride shares in the Tata Motors company,” Mr. Kasliwal scoffed. “He buys gold.”
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/india-tries-to-temper-the-hunger-for-gold/article7723897/