India's love for gold

By
The Economic Times writes:

The value of gold held by Indian households is more than double the market value of the equity stock they own. At the beginning of this fiscal, that totalled an eye-popping $200bn, which is almost a third of India’s GDP.

Gold holdings among Indian households at current market value is about 2.5 times the current equity stock holding of $80bn. While the share of gold in household savings declined during ’00-02 to 5%, it has been on the rise once again during the past two years, and stood at 8-10% during the quarter ended March ’05.

But this love for bling-bling comes at a pretty steep cost. If instead of investing its annual savings in gold, India were to invest this in productive business assets, its annual GDP growth would be higher by about 0.3-0.4%. “The cumulative GDP value lost for parking $200bn worth of savings over the years in this unproductive asset is huge,” say industry experts.

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