If one goes by the data, there is some grain of truth of course. There has indeed been a rise in share of gold in India’s total imports. Gold imports have risen since FY11. Yet this phenomenon can be attributed mostly to persistently high inflation in India, resulting in the real rate of interest being negligible and even negative. It is therefore natural for domestic savers to turn to gold for succor. According to Societe Generale, the elevated level of inflation (India’s WPI averaged 8.23% over an unprecedented period of 48 months) can largely be attributed to policies that, rather than ameliorating problems, magnified those.
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