Why Indians should give up their craze for gold
Venkatesha Babu -
Monday, June 09, 2008 7:05 PM
Akshaya Trithiya got over a month back. There was the usual mindless (to my mind) rush to buy the yellow metal. India every year uses 850 tonnes of gold (1 tonne = 1000 kilograms) mostly for ornaments and very little for industrial use. Of this around 250 tonnes is re-cycled gold. We import 600 tonnes of gold every year. While this post is not about how gold is a good/bad investment choice (In fact in the last 5 years it has more than doubled in its price), I am appalled at how much of our hard earned forex we spend on importing this metal.
While it is an individual's choice to buy gold or not, from a country's perspective it is an absolutely bad investment. We can more productively invest the same money in building our infrastrcture instead of forking out our forex to countries like Australia and South Africa, which produce the yellow metal. Unfortunately our cultural inclinations ensures that we keep buying gold.
What is the solution ? No, not banning its import. Anything banned only becomes more expensive. Not unavailable. Remember the old Hindi movies where the gangsters would smuggle gold. Luckily such retarded policies were phased out by the government in early 1990's. Though it sounds cliched, education and awareness are the only solutions.
On a recent visit to Kochi, Kerala (or Cochin as the rest of the country calls it) every road — at least to my eyes — seemed to be having two gold retail shops. Malayalees seem to love gold more than most Indians, which is actually saying something. Unless Indians collectively realise that gold is probably not a wise investment to make as a nation, we will be sold some yellow metal for an exorbitant price. Savvy marketers who just want a retail cut will sell it to us by exploiting every sentiment including religious one. Even as I post this, I can already hear my wife excoriate by saying "Is that the reason why you have never brought me a gram of gold, because you want to save the nation ?" But as the old wag said, forget saving the nation, now if I save a part of my salary, I am happy.