Gold situation in India hindering economy
In India, the demand for gold is so rampant that it is trumping record high prices and having a negative effect on the economy, according to Voice of America.
Marriage season is high time for jewelry and gold demand throughout India. The country hosts approximately 10 million marriages each year, and, last year, imported nearly 816 metric tons of gold, the new source reported.
“Today I think what India faces is a situation where we run a high current account deficit and gold imports account for almost 80 percent of the current account deficit," D.K. Joshi, a chief economist with Crisil rating agency in Mumbai, told the news source. "It is not a very productive way of saving. Also what we have seen is people have moved away from investment in financial instruments towards gold, so that is also not very healthy.”
The news source stated that gold accounts for the highest outflow of foreign exchange in India, as the nation imports the metal from other countries. Until recently, the Indian government prohibited private businesses from directly importing gold, but that changed recently with one exception. Now, the government is expected to consider changing the law to allow other private companies to directly import the metal. Gold exploration is rampant in Mexico, Canada and the United States.