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Indians and gold

Gold imports are counted as “consumption”, but most Indians would consider gold to be a form of long term insurance, a form of savings. All of us know of families that tapped into their gold “reserves” to pay for college, to start a business, to pay for healthcare and so on. India imported nearly $50 billion of gold last year; possibly even more gold got into India unofficially. Indians are treating gold as a “reserve asset” and long term it is a better reserve asset than US dollar, treasuries, Euro, Yen etc. Gold is the people’s reserve asset.

Gold confers impressive micro-economic resilience and hence macro-economic stability on India. Rather than think “Indians are addicted to gold”, I think “Indians value resilience and stability”. For all these reasons, it is better to treat gold imports as people’s savings.