Gold is killing the Indian economy 2
Gold is gradually losing its luster as prices have dropped more than 10% in the past three months in the international market.
Buying billions of dollars in international gold means they are transferring a mountain of domestic currency abroad, imbalance in the amount of money going in and out of the country and reducing the value of the rupee.
India is the world’s largest gold importer.
India is the world’s largest gold importer, consuming nearly a third of global supply each year.
Indian Finance Minister P.Chidambaram said: `We have applied a policy to restrain people from buying gold. This will have a positive effect on all aspects of the economy.`
The current deficit is high, but the real issue for India is whether the money flowing into the country is enough to offset the money going out, according to Bibek Debroy, an economist at the Center for Policy Research.
Meanwhile, only direct investment in factory construction or in venture projects brings long-term benefits.
For 1.24 billion Indians, gold is more than just an investment channel.
Additionally, its traditional importance also makes gold a necessity for weddings and other occasions.
For the Indian economy, gold obsession is worse than making the wrong investment.
An increasing trade deficit will devalue the domestic currency.
