From bridal baubles to bullion, India’s appetite for gold knows no bounds

Published: February 19, 2013
Gold bars

Gold has been deeply entwined in Indian culture for thousands of years. Nowadays, India is by far the world’s biggest buyer of gold. Indranil Mukherjee/AFP/Getty Images

KAY JOHNSON 
THE ASSOCIATED PRESS

MUMBAI, India — India’s steep new tax on gold imports doesn’t deter Mousumi Rao as she holds up a glittering $5,000 filigree necklace that could adorn her daughter on her wedding day. Rao’s daughter isn’t getting married next month or even next year. The 12-year-old is at least several years away from her wedding.

Since tradition demands a bride practically drip with gold jewelry, it’s never too early for an Indian family to start preparing, particularly with the high cost of gold these days.

“I’m collecting things for her now so when she grows older and marries, I should have enough gold for her,” said Rao. “It is very auspicious for us, one of the most auspicious things, to give gold to your daughter.”

Gold has been deeply entwined in Indian culture for thousands of years. Nowadays, India is by far the world’s biggest buyer of gold and those imports are an increasing drain on an economy that is growing too slowly to reduce widespread poverty. Last year Indians imported 864 tonnes of gold, about one fifth of world sales. The cost of 2.5 trillion rupees ($45 billion) was second only to India’s bill for imported oil. The unquenchable appetite for gold coins, bars and jewelry has swelled India’s trade deficit and weakened its currency, making crucial imports such as fuel more expensive.

The government can’t do much about oil imports — without fuel, the economy would grind to a halt — so in the past year it has tried to rein in gold demand, raising the import duty three times in a year to its current level of 6 per cent. The higher tariff is proving little match for age-old tradition.

“Every Indian wants gold. Now is the wedding season, and I’m seeing an increase in demand no matter about the tax,” said jeweller Arun Kaigaonkar. “Prices have been rising for years, and still people buy.”

Gold jewellery

Last year Indian gold-buying briefly dropped for six months, but then it roared back in the second half of the year. And in January, sales spiked sharply as jewelers and investors rushed to buy ahead of the import tax hike to six per cent, which took effect at the end of the month. Manjunath Kiran/AFP/Getty Images

He said not only jewelry, but gold bars and coins remain in high demand because in many rural areas banking is less available. “In the countryside, people save their money only in gold.”

Last year Indian gold-buying briefly dropped for six months, but then it roared back in the second half of the year. And in January, sales spiked sharply as jewelers and investors rushed to buy ahead of the import tax hike to six per cent, which took effect at the end of the month.

“The culture of gold is so strong in India. It’s difficult to contain this demand by just tweaking import duties,” said Samiran Chakraborty, an economist with Standard Chartered Bank in Mumbai.

Through centuries of warfare and the shifting borders of regional kingdoms, gold was the safest currency. In some Hindu legends, Brahma, the god who created the universe, was born from a gold egg. In India, gold is spiritual and it is also practical. Parents of the bride give gold as a symbol of their prosperity. But it is also insurance against a bad marriage, since the jewelry is the wife’s, though many men take it anyway.

In early 2011, an ounce of gold cost about $1,375 on the world market, or nearly 62,000 rupees in India at the exchange rate at the time.

It now costs over $1,600 an ounce but the drop in the rupee against the dollar means the cost in India has risen by an even greater extent, to about 90,000 rupees.

The rising price does reduce demand but each festival and wedding season brings sales back up again.

Industry experts say there are signs that higher import taxes have encouraged smuggling, which hasn’t been a problem since India lifted strict gold controls more than 20 years ago.

gold necklaces

The rising price of gold in India does reduce demand but each festival and wedding season brings sales back up again. Sam Panthaky/AFP/Getty Images

Few expect a return to those draconian measures. Potentially more effective is a new scheme to get the vast amounts of gold already in India back into circulation.

“India is not only the world’s biggest importer of gold, it’s the biggest hoarder of gold,” said Albert Cheng, a managing director of the World Gold Council, which estimates there are some 18,000 tonnes of gold locked up in bank vaults and family homes around the country.

Standard Chartered’s Chakraborty said such “non-productive” gold in India is worth some $1 trillion, about half of India’s GDP.

The government recently stopped requiring gold-backed exchange-traded funds to hold physical gold in the amount of their sales. Instead, the funds will be allowed to deposit some gold with banks who in turn can lend it to jewelers, which in theory should reduce imports for a time.

“Up to now, both jewelers and ETF’s have been driving the rise in import demand. Now, maybe they can start to cancel each other out,” Chakraborty said.

The funds have combined assets of about $1.8 billion, a small proportion of India’s gold purchases, so progress might be slow.

“Gold is considered pure in our culture, and giving it is a virtue. Certain amount of gold must be bought,” said 26-year-old Rohini, a Mumbai physiotherapist as she browsed in a jewelry shop.

Her mother, Jaishri, agreed. “Of course, nobody can afford as much as we used to. Once upon a time, we used to buy gold by the kilo,” she said. “But the price is so high now, we just buy what we can for the necessary things.”

01:02ET 20-02-13

[+]

Tags: ,





Featured

Abbotsford's Ravinder Singh Atwal has been identified online as the truck driver who died in a truck crash on Highway 99 near Delta on Wednesday. The Abbotsford father was killed when his dump truck hit the highway median and burst into flames. Submitted photo/Facebook.

Abbotsford trucker killed on Hwy 99 remembered as ‘one of the nicest guys’

GLENDA LUYMES VANCOUVER DESI An Abbotsford father killed in a fiery crash on Highway 99 is being remembered as hard-working and friendly by fellow truck…
Continue Reading »

A man reads the latest issue of French weekly newspaper Charlie Hebdo bearing a cartoon of Prophet Mohammed at a French bookseller in Abidjan on January 19, 2015. SIA KAMBOU/AFP/Getty Images

Mumbai police arrest newspaper editor for reprinting Charlie Hebdo cartoon

VANCOUVER DESI Mumbai police have arrested and since bailed out the editor of an Urdu language newspaper for reprinting a Charlie Hebdo cartoon of the…
Continue Reading »

Indian spectators watch as a float carrying a sign that reads "Congratulations! It's a Baby Girl" passes by during the Indian Republic Day parade in New Delhi on January 26, 2015. The float represented India's Ministry of Women and Child Development.  An estimated 26 million babies are born anually in India, a country considered to be one of the worst places to be born a girl because of a societal 'gender gap' that favours boys and preferences for male children. ROBERTO SCHMIDT/AFP/Getty Images

Father in India arrested for attempted murder after trying to bury his daughter alive

VANCOUVER DESI A father in India has been arrested for attempted murder after he tried to bury his 10-year-old daughter alive, according to Britain’s Daily…
Continue Reading »

LOCAL NEWS

Abbotsford's Ravinder Singh Atwal has been identified online as the truck driver who died in a truck crash on Highway 99 near Delta on Wednesday. The Abbotsford father was killed when his dump truck hit the highway median and burst into flames. Submitted photo/Facebook.

Abbotsford trucker killed on Hwy 99 remembered as ‘one of the nicest guys’

GLENDA LUYMES VANCOUVER DESI An Abbotsford father killed in a fiery crash on Highway 99 is being remembered as hard-working and friendly by fellow truck…
Continue Reading »

Opposition Muted to Harper’s New Anti Terror Bill

BY Ujjal Dosanjh Special to Vancouver Province I smell an election coming. Not in October 2015; much sooner than that. Harper has just unveiled the…
Continue Reading »

Opposition parties treading carefully on new anti-terror legislation

By Stephanie Levitz THE CANADIAN PRESS OTTAWA — Anti-terrorism legislation introduced by the Conservative government Friday received a cautious reception by the opposition parties who…
Continue Reading »

Don't Miss...

Vancouver-BC

Raise your hand, send us a selfie and make a statement against racism (with video)

VANCOUVER DESI Vancouver Desi’s digital anti-racism campaign, Raise Your Hands Against Racism, officially kicked off Thursday, with people across the Lower Mainland sending in selfies…
Continue Reading »

File photo: Curry chicken on rice. Sam Leung/PNG

Spicy treats on menu as 8 chef teams battle for Vancouver’s second-annual Curry Cup

VANCOUVER DESI A group of Lower Mainland chefs are set to go head-to-head with their South Asian cooking skills as they gear up for Vancouver’s…
Continue Reading »

Shah Rukh Khan, Abhishek Bachchan, Deepika Padukone, Sonu Sood and Boman Irani in a still from the Bollywood film Happy New Year.

Indian expat avoids stalking conviction by blaming Bollywood for his behaviour

IANS Sydney  – An Indian man’s excuse that Bollywood love stories encouraged him to excessively approach and stalk women helped him avoid conviction in the…
Continue Reading »

File photo: Commuters hang by doors of a crowded local train in Mumbai, India, Tuesday, July 8, 2014. Three men were killed on Monday after they attempted to take a selfie by a moving train near Agra. AP Photo/Rajanish Kakade

College students killed while attempting train selfie in India

VANCOUVER DESI Three college friends on their way to India’s Republic Day celebrations were killed by a speeding train after they tried posing for a…
Continue Reading »

Screen shot of Shah Rukh Khan's first video tweet. Submitted.

Shah Rukh Khan sends out India’s first tweet using Twitter’s new mobile video camera

VANCOUVER DESI Bollywood superstar Shah Rukh Khan was the first-ever Indian to use Twitter’s freshly launched mobile video camera. Twitter announced the new feature on…
Continue Reading »


Bollywood Latest

Akshay Kumar

Askhay Kumar offers martial arts training to visually impaired girls

PRASHANT SINGH HINDUSTAN TIMES Last year, Akshay Kumar — who was a professional martial arts trainer before he started acting — launched an initiative to…
Continue Reading »

Shah Rukh Khan (L) and Kajol (R) are rumoured to be appearing in the next Rohit Shetty film. Getty Images.

Rohit Shetty tightlipped on SRK, Kajol casting rumours

IANS Mumbai — Bollywood’s blockbuster director Rohit Shetty is remaining tightlipped on rumours he’s managed to rope in a casting coup of Shah Rukh Khan…
Continue Reading »

Bollywood sex

Sonam Kapoor never planned to use her father’s fame to jumpstart her Bollywood career

IANS Mumbai  – It’s always thought that Bollywood’s star children have it easy, but actress Sonam Kapoor says that at the start of her film…
Continue Reading »