India's gold buyers, smugglers will have last laugh on government


Government, RBI Are Again Getting It All Wrong on Gold

By Nidhi Nath Srinivas
The Times of India, Mumbia
Wednesday, May 15, 2013

The Indian consumer -- that's us -- is currently Public Enemy No. 1. We are apparently responsible for leaving the nation's balance sheet in a shambles with our insatiable lust for gold.

If the government and the Reserve Bank of India (RBI) had their way, anyone spotted buying gold would be flayed. Luckily, we are still not that sort of country.

But both are doing everything possible to punish us. We can't wear our own jewellery above Rs 1 lakh on an overseas holiday. We can't buy coins easily. The paperwork at a jewellery store is designed to turn away everyone except the most determined. The higher customs duty intends to make gold prohibitively expensive.

... Dispatch continues below ...


Fred Goldstein and Tim Murphy open All Pro Gold

All-Pro Gold, run by long-time GATA supporters Fred Goldstein and Tim Murphy, offers its services to GATA supporters and anyone else interested in precious metals. The company brokers a full line of precious metals and numismatic coins. It aims to inform prospective clients about the importance of the monetary metals as part of a diversified financial portfolio and to keep prospective clients current with market trends. All-Pro Gold has competitive pricing and ships promptly to clients so they may have physical possession. Learn more by e-mailing or or telephone 1-855-377-4653 or visit

Plus, jewellers are being bludgeoned out of business. They can't import gold. Gold will be rationed through government-owned banks, which will cater only to "genuine" demand. And they are being threatened with draconian laws.

Are we really to blame? Who started the gold coin culture in India? Not the family jeweller, not the consumer. It was the government and RBI that encouraged high-street banks, and even the post office, to start peddling gold coins about five years ago.

Banks did their job so enthusiastically that, soon, buying a gold coin was easier than opening an account. It was the government that had okayed exchange-traded funds that allow punters to buy limitless gold on paper. The government and RBI blessed gold loan companies as microfinance by another name.

Neither pondered the impact of these moves on consumer behaviour and the economy. Imported coins don't create local jobs, don't allow local value addition, and don't open opportunity to earn foreign exchange through exports. Yet they were promoted aggressively.

Well, the chickens have come home to roost. Now that the marketing is clearly a huge success and we have learnt to appreciate even the tiny 5-gram coin, it is too late to complain.

Moreover, why should the government and RBI complain? Petrol is the largest item on our import bill at $125 billion. But no one is suggesting we shut down car factories and go back to the tonga and cycle-rickshaw.

As C. Rangarajan, the prime minister's economic adviser, says in his overview of the economy, "Oil is a big factor in our strained external payments but by no means the surprising one." We have accepted that petrol is vital for modern life.

Cooking oil is the third largest item on our import bill. Till the early 1960s, no one in India had tasted palmolein. Even after it was introduced by Indira Gandhi in ration shops, consumers shunned it. Forty years later it is India's top-selling oil. The government's marketing efforts paid off. We have acquired a taste for it and spend a cool $10 billion annually.

In both cases, the government has accepted that we urgently need these sources of energy. Instead of trying to beat down consumer demand, the government is trying to find other solutions to augment petrol and cooking oil supply. That is wise.

So why does this wisdom blow a fuse when it comes to gold? Senior economists, policymakers, and the RBI all have acknowledged that gold is popular because it is the only asset that the poor can one day aspire to buy. There is nothing in the market that can replace it.

More important, gold in India is about the daughter's share in family wealth, the perfect wedding gift, our idea of beauty and high status. It is part of our cultural DNA. It makes us who we are. A five-fold rise in prices in as many years has not dented our willingness to spend on it.

Ideally, the government should embrace this love and find ways to use it profitably. Dubai doesn't produce any gold. Yet it has been able to promote itself as the ultimate destination for buying and trading gold.

London doesn't produce gold either. But it has always been the hub for price discovery and has some of the safest vaults on the planet.

All this takes gumption and a farsighted vision of what gold can really do for the economy.

Instead, the government and RBI are treating us like addicts. They are hoping that giving us the cold turkey will set things right. But you can never fight human nature. Clampdown on gold will be like the prohibition on liquor in Gujarat. Consumers and smugglers will have the last laugh.

* * *

Join GATA here:

World Resource Investment Conference
Sunday-Monday, May 26-27, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

Or by purchasing a colorful GATA T-shirt:

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

To contribute to GATA, please visit: