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Moderating gold demand

As is evident, gold acts as an insurance cover as well as savings instrument

Business Standard 

While statistics pertaining to expected gold import in the current year in the editorial, “Gold rush, again” (July 13), may appear alarming and economists may give reasons for reducing gold in the economy, yet the lure of the yellow metal in Indian society remains strong. This is confirmed by the findings of India’s citizen environment and consumer economy (ICE 360º) survey.

One out of every two households surveyed bought some gold during the last five years. Sixty four per cent of those surveyed could not buy gold because there were “no savings to spare”. Reasons for taking loan against gold were mainly medical emergency and financial crisis.

As is evident, gold acts as an insurance cover as well as savings instrument. The informal economy has a gold-plated underbelly that averts the government’s gaze; it comes into play to absorb economic and social shocks in low and middle-income businesses and/or families.

Whatever the government’s policy concerns, weaning people away from gold may not be desirable in the absence of reliable government social safety nets. Two unorthodox suggestions: First, facilitate and make reliable gold trading processes so that people work with lesser quantity of gold; second, popularise low-weight jewellery, which might bring down overall demand.

Y P Issar   Karnal
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