25-08-2017, 09:32 PM
India’s Gold Rush: Its Impact and Sustainability
1India’s Gold Rush.pdf (Size: 561.81 KB / Downloads: 41)
Executive Summary
India imports most of its gold requirement. Gold as a commodity on its own does not add much to the productive capacity of the economy. Moreover, the foreign exchange reserve that is used to import gold reduces the availability of this resource to finance the import of other commodities. Such high value of gold imports has now started hurting India’s current account position.
Gold’s share in total import bill of the country has gone up from 8.1 per cent in 2001-02 to 9.6 per cent in 2010-11.
Annual Rate of Gold Imports growth in the last three years was very high. In 2008-09 the growth was 23.0 percent, in 2009-10 it was 38.1 per cent and in 2010-11 the recorded growth stood at 18.3 per cent. Thus the average rate of growth during this period was 26.8 percent. Although the global financial conditions prevailing during this period were volatile yet such high levels of gold imports indicates India’s obsession with gold.
Introduction
In much of Asia, the Middle East, and the Indian subcontinent, gold is the best possible protection against upheaval, both political and economic. For men and women throughout the developing world, gold is still one of the most liquid and widely accepted forms of exchange, quite simply the most efficient store of value they possess.
As we know that India’s domestic production of gold is very limited, the rising demand has to be sourced from outside the country. Moreover, Gold as a commodity on its own does not add much to the productive capacity of the economy. When one buys gold, it either is stored in lockers or gets converted into jewellery. In both the cases, money spent on purchasing gold gets blocked since gold is not a productive asset.
Evolution of Gold Policy
Pre Liberalization
The gold policy until economic reforms in the early 1990s centred around the major objectives of discouraging people from purchasing gold, reducing domestic demand, regulating supply of gold, , curbing smuggling and black income and conserving foreign exchange.
Some of the important characteristics of the gold policy that had been adopted over the years by the government until the liberalization
Domestic Scenario – Gold Import’s Vs Amartya Sen’s Priorities
As per a Gold Council Report4 focusing on Indian Gold consumption indicates that Gold jewellery accounted for around 75 per cent of total Indian gold demand in 2009, the remainder being investment (23 per cent) and decorative and industrial use (2 per cent). However looking at the larger picture we all are well aware about the extent of poverty, illiteracy and the lack of social infrastructure that exists in India. Even, the Planning Commission in its Approach to the 12th Five Year Plan has laid emphasis on an inclusive model of growth. Ideally, inclusive growth should result in lower incidence of poverty, broad based and significant improvement in health outcomes, universal access for children to school, increased access to higher education and improved standards of education, including skill development. It should also be reflected in improvement in provision of basic amenities like water, electricity, roads, sanitation and housing. Even, the noted economist Amartya Sen has acknowledged the importance of a holistic growth and advocated the thought that human development, as an approach needs to be the basic development idea thereby suggesting that it is advancing the richness of human life, rather than the richness of the economy in which human beings live.