Indian house-holds fascination for GOLD for its ornamental value is comprehensible as it is a part of Indian culture and tradition. However, of late, Indians have started buying GOLD as a hedge against inflation, thus enormously increasing the physical gold imports causing a huge trade deficit which is resulting in ever increasing India’s fiscal deficit. Gold imports are next only to Crude oil imports and if this import component is not reduced, it will have a wide ranging direct and indirect impact on both macro and micro levels of economy.
Gold demand and imports can be reduced partly, if Government issues Inflation indexed bonds/ securities akin to the instruments in place in the developed economies viz., US, UK, France, Italy, Canada etc,. It can be a good instrument to hedge against inflation for investors.
Gold demand and imports can be reduced partly, if Government issues Inflation indexed bonds/ securities akin to the instruments in place in the developed economies viz., US, UK, France, Italy, Canada etc,. It can be a good instrument to hedge against inflation for investors.
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