Gold is so popular in India that it’s created an economic problem for Prime Minister Narendra Modi.
The country vies with China as the world’s biggest buyer of gold jewelry, thanks in large part to its cherished status in marriage ceremonies. Imports of the metal came to $35 billion last year, and were equivalent to about 43 percent of the country’s current account deficit in the September quarter.
In November, Modi launched a program to lure private gold holdings onto the market by getting banks to offer interest on items deposited in their vaults. If he really wants to limit the amount of gold imported into the country, here’s a smarter way of doing it: Make it easier to produce the stuff domestically.
At the start of the 20th century, India was the world’s sixth-biggest gold producer, according to the country’s Geological Survey. Since then, production has slipped so dramatically that the likes of Sweden, Nicaragua and Kyrgyzstan are bigger miners.
According to the Geological Survey, about 80 percent of the country’s gold output in 2006-2007 was a by-product of smelting imported copper.You’d think, given this backdrop, that the government would be doing everything it could to encourage local miners.
Far from it: Deccan Gold Mines, which hasn’t dug up an ounce in 13 years because of the difficulty of obtaining permits from state governments, told Bloomberg’s Swansy Afonso, Rajesh Kumar Singh and Archana Chaudhary that it has no incentive to explore for gold after laws passed last year forced miners to bid for the right to mine the deposits they find.
For the rest of this column, click here: http://www.bloomberg.com/gadfly/articles/2016-04-07/india-could-be-sitting-on-a-gold-mine-and-not-know-it