Foreign trade experts have predicted that by avoiding buying new gold for a year, investing in gold investment projects can keep inflation and current account deficit under control.
What happens when a country consumes more of something it produces less of? Imports related to it will be high. The higher the value of the imported product, the higher the cost of imports. No country likes this. India is currently facing this situation. Yes, the country’s June imports increased to $63.6 billion.
India’s imports of coal, petroleum and fertilizers have increased further as commodity prices have already increased due to the war in Ukraine. This will widen the current account deficit and weaken the rupee. This will further fuel inflation.
In such an environment, it is good that India does not want the country’s gold imports to increase. According to a World Gold Council report, India’s gold imports hit a decade-high in 2021. A continued increase in gold imports will strain the current account deficit. export,
The gap between imports widened to $189.5 billion in fiscal 2022 from $102.2 billion a year ago.
The current account balance in 2022 is a deficit of 1.2 percent of GDP. In 2021, the balance was 0.9 percent higher. The current account deficit is likely to widen further in FY 2022-23 unless serious measures are taken to prevent further widening.
The central government has hiked the duty on gold imports from 10.75 per cent to 15 per cent with effect from July 1. This move by the government alone is not enough to stop the depreciation of the rupee and reduce the current account deficit through imports. It has already announced tax on petrol and diesel exports.
Being the 2nd largest gold consumer in the world, India has to impose all kinds of restrictions to reduce the demand for gold. In the past, the central government has raised the duty on gold imports like this. But the demand for gold alone did not make a big difference.
Bond of Indians on Gold:
Investing in gold is associated with Hindu tradition. Invest in gold at least twice a year. Investing in gold is like investing in a small savings plan. Especially, two days are important as Akshaya Trithi and the first day of Diwali. Even though the price of gold has risen on such days, the demand for gold has not only dissipated in the last decade. For Indians, no alternative to gold is considered a direct investment.
Gold still holds an unshakable place in Indian weddings. Finance
With high interest rate schemes in the markets, Indians should reconsider their craze for gold. As a safe investment, the rationale for investing in gold as a hedge against inflation is undeniably strong. Nothing compares to investing in gold. However there are alternatives.
Indians can adopt a new way of investing in gold and help reduce the country’s demand for gold as much as they can. Not many can win a gold medal for the country like Neeraj Chopra. But, their names in the list of gold buyers can be kept aside. That means instead of buying gold directly, you can invest in gold bonds linked to gold.
Holding gold is not safe. So keeping it in a locker will incur cost. Second, the quality of gold will also have some flaws. When purchased as jewellery, the quality of gold may decrease and the investment value may decrease. Third, 10 to 20 percent is deducted for depreciation when selling gold jewelry. This may vary depending on the jeweler. This also reduces the investment value of gold. So much for buying and selling gold
There will be an invisible cost. So investing in gold may not be the best one in many ways.
What is the solution? :
For India, the financial market is mature. And many are linked to the price of gold based on gold for investors
There are gold bonds. It is not only safer but also wiser than the hassles of holding gold.
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The number of direct investors in the stock markets and the number of demat account openers has increased last year. Asking for an IPO
The number of applicants has also increased. With the rise of smartphone usage, the rise of digital brokerages is a sign of a change in investor sentiment. In the last 12 months, the number of active demat accounts has grown by 63 percent to 9 crore.
Now is the time to help Indian investors take the next step. The best way to save money is to avoid buying expensive gold when inflation is on the rise. Without raising the import duty on gold, some say it will increase gold smuggling. If the demand for gold imports is to decrease, if Indians stop buying gold for a year or if they want to buy gold for sure, there are some gold investment schemes available in India. If there is mass awareness and acceptance, the current account deficit of the country can be reduced to a certain extent, along with reducing the import demand of gold.
Investment in Gold Bonds:
There are two alternatives to this. First, you can invest in mutual fund schemes like gold exchange-traded securities (ETFs), gold ETFs. By investing in gold ETFs, you can keep track of gold prices. A gold ETF is equivalent to 1 gram of gold jewelry. 99.5 percent pure gold. At least one gram of gold can be invested. Investors in gold ETFs can switch to gold when needed.
Another option is SGB Gold Bonds, where the Reserve Bank issues bonds on behalf of the government. As investors buy gold bonds,
Along with the interest rate, the benefit of price rise can also be enjoyed. Buying gold directly helps reduce the risk rather than the cost. First of all buying gold bonds online is cheaper than buying them directly. Second, gold bonds get a permanent rate of interest. Thirdly there is no need to spend on holding gold bonds.
Gold recycling can be increased by:
Another way Indians can reduce the country’s gold demand is through recycling. China is the number one recycler of gold. This
Followed by Italy and USA. India is ranked 4th.
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According to a report by the World Gold Council, in the last 5 years, 11 percent of the gold supply is old
Gold comes from old gold. India has recycled 75 tonnes of gold by 2021.
The country’s gold recycling is still uncoordinated. Accordingly, a one-year halt to new gold purchases and a continuation or recycling of gold-based investments would provide a golden solution to India’s current account deficit challenge.
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