India's gold fetish: $ 300 billion worth of gold consumed in last 10 years!

Last Updated: Thu, Jun 22, 2017 18:45 hrs
Gold (Reuters image)

India has 'consumed' around $ 300 billion worth of gold in the last ten years, a report by Kotak Institutional Equities has found.

The report says gold prices have risen by 300% in this decade (FY 2008-FY2017).

The best period for investing in gold was, however, the first five financial years (FY2008-12) covered by the report when 'trade' worked well as gold prices were rising rapidly.

But the story has not been the same in the last five financial years (FY2013-17). This period has seen half the gold 'consumption' of the past decade and virtually flat gold prices.

The report also noted that gold imports spiked when confidence among Indians in government policies fell. Kotak Institutional Equities attributed the sharp increase in gold imports up to FY2013 to these fears.

"India imported and consumed US$ 209 billion and US $ 190 billion worth of gold in FY2010-14 out of the total US$ 340 billion and US$ 300 billion of imports and net domestic consumption over FY2008-17," the report noted.

When it comes to the GST set to be rolled out on July 1, the report was unhappy with the special treatment meted out to the gold sector at a time when "soft approach to and special status for gold when gold's use as a 'store of value' is less relevant and as 'a store of black money' an anathema.

"India’s policy on inflation management has achieved remarkable success, which should reduce gold's function as a 'store of value'. India's financial inclusion program has attained undeniable success and should reduce the compulsion of citizens to own gold as they have access to bank accounts. We have long argued for a proper taxation policy on gold to achieve the desired national goals," the report observed.