Bhrigu's question

कभी जो याद भी आता हूँ मैं तो कहते हैं के आज बज़्म में कुछ फ़ित्ना-ओ-फ़साद नहीं - मिर्ज़ा ग़ालिब

Location: the valley, California, United States

Bay Area, Strategy Manager, Haas- U. C. Berkeley, Marathons

Friday, December 09, 2005

CS Monitor: India's costly love affair with gold

The CS Monitor writes:
In India, nearly all that glitters is, in fact, gold. With a stockpile already worth $200 billion, Indian gold purchases jumped nearly 40 percent this year, making the country the world's leading consumer of the precious metal.

Gold may seem like a savvy investment as its value hits a 22-year high. But experts say it may actually be weighing down one of Asia's fastest rising economies. It would be better if the money locked up in the glistening yellow metal went instead to finance new start-ups or better roads, boosting the Indian economy over the long term, economists contend.

Read the full thing.

The article gets it spot-on with regard to the distrust of Indians with the financial markets. The markets are very speculative and prone to indiser-trading and fixing. Therefore, there is very little faith in such institutions and consequently, a whole conservative ethos around gold has taken root. Also, gold being personal propertyand a good, there is practically no document trail, making it attractive to tax-evaders.

The way to reduce this obsession is to not simply to make more financial institutions, but to make the civil justice system more effective and far-reaching. Strengthen existing laws, institute broader prison terms for financial fraud, and get the government's various Ponzi schemes out of the financial sector.

Related article in the Economist: The Little Yellow God.


Blogger doubtinggaurav said...


Co-incidentally Mr Shekar Gupta used same Ponzi Schemes to describe EPF,

Considering the present bunch which is ruling, I am very pessimistic about any institutional reform, too many vested interest will ensure that any reform is nipped in the bud.


1:37 AM  
Blogger Quizman said...

Absolutely, since the current ruling party and their cronies instituted these ponzi schemes in the first place. They have every vested interest to preserve the status quo.

11:17 AM  
Blogger Abi said...


NYTimes covered the environmental hazards associated with current gold production using very lean ores that require cyanide leaching. The accompanying multimedia presentation had a short section about gold consumption in India. Do check it out here.

India finally took baby steps to allow gold mutual funds (in the last year or so?). This should release some of the money locked up into gold. The impact of this move is not clear, though.

8:04 PM  
Blogger J. Alfred Prufrock said...

Many people invest in gold just because it's simpler. Our financial sector needs to improve the interface. Check out a post on India Uncut yesterday.


6:44 PM  
Blogger Quizman said...

Thanks, Abi, J.A.P.

5:13 PM  

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