Bloomberg: — The Indian government wants to cut gold imports to 800 tons by the end of the financial year, down more than five percent from the previous period. The restrictions are aimed at closing a widening current account deficit but, as Paul Allen reports, the authorities are facing a tough and traditional foe. (Source: Bloomberg)
Fergal O’Connor writes at The Conversation:
The Indian government has been trying to reduce its citizen’s demand for imported gold through a number of means over the last few years. This is part of a wider crack down on currency used in the black market, that included the withdrawal and replacement of its two largest denomination bank notes in early November. The strategy will likely have some unintended consequences if we take our cues from the events of 1910.
Indians’ famous love for gold has created serious and ongoing economic issues for the nation. In 2011, Australian investment bank Macquarie estimated that 78% of India’s household savings were held in gold.
In effect, this means that India has a dual currency system where people choose to save mostly in gold rather than rrupees. This is unlike any other major economy and begs the question: how do you wean a population off a precious metal?