CS Monitor: India's costly love affair with gold
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.
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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.