Is fondness for gold hindering India's growth?

What do these peoplewant? Channel the investments into stocks / companies / what else? If only we look at what happened in the last 3 years - most of the portfolio gains were pocketed as fees by these vultures. I dont think there is a better plance than gold, even if it is not productive it has appreciated by more than 15 % in a year. How many of the other investments would have atleast given u back the prinicipal, let alone any growth?

Yes it's.

What productive investment? With these corrupt government
people don't trust anyone. Gold is the onlyway they can save it from corrupt people. By investing in Stock do you think it increasing productivity? Think again. It makes lavish living for people like Ambani brothers and Mayavati fetch jet for sandals. These people are the one who forgets their roots and root cause of Bharat's unfortunate people.

I am shocked by the sheer stupidity of the comment. Does the author mean that all the central banks of the world are fools because they are holding gold. In fact by investing in gold Indian households are cementing the foundation of economy.

When we convert the chash into non moovable property then its appreciation and depriciation is affected less than the chash investment hence the chances of appreciation is slightly less in gold or immovables and same in depreciation. So keeping your money in circulation in the market is better as a long term investor for ourselves and for our country economics and this is a patriotic act.

Even if we assume there will be no gold bubble, and the price of gold will increase in future, gold craze is still hurting the economy - because, we can't wait 5-10 years to realize the economic worth of the gold. We need roads NOW, we need power plants NOW, we need schools and hospitals NOW. 5 years later will be too late, and we would have missed the bus. Unfortunately, there seems to be no sense of urgency in this country.

Answer to following question may clear the doubt.

Does the world have the market to absorb investment in econonic activity if all indians sold their gold and invest in economic productive activity? I think the economic market will crash due to excess supply. Gold are our reserves and be sold only when time to sell reserves comes.

The point is well taken. Here are some points to the contrary. Unlike petrol - which is imported on compulsion, gold is imported only to meet demand for investment besides domestic consumption. A large part of this gold (as also family jewels) is used to secure loan, the size of which is ballooning, both because of aggressive securitization and owing to increase in value of gold. Loan-money in turn moves into the active economy. Gold creates jobs, business opportunities, export revenues (therefore looking at only the dollar value of import may give a lopsided view), government revenues, and also fuels derivative markets. Last but not of the least importance, increasing gold price makes us Indian richer by the day; when any one of us books profit, a more solvent Indian is born at nobody’s cost, which augers well for the economy. Therefore, GOLD is creating value and solvency to the nation, but with the caveat that the declining cycle may be as painful as the price-rise cycle is making us happy.

The case for financial savings is made because financial savings can be invested in creation/up-gradation of productive assets in the economy, thereby giving economic growth a sustainable boost.

When savings are kept under the pillow, they cannot be invested and hence are 'lost' to the economy.

When I save and buy gold from someone within the country, I exchange my savings for gold. The seller may spend some (boost GDP through multiplier as well) and save some. If his savings enter the financial system, it can be used to invest.

But if the country imports gold, capital leaves the country and a shiny yellow metal enters the country. The capital that left the country is no longer available for making investments. Instead we have a shiny yellow metal, that feels good to hold and look at, but it sits in our vaults doing nothing and contributes nothing to productive activity.

Hence the anguish over rising gold imports. (without regard to future prices)

However, looking at the numbers, an increase in 0.5% of GDP (from 1.5 to 2) over 5 years is an average (simplified) of 0.1% of GDP per year increase. Out of our total savings of 30-35% of GDP, 0.1% or even 0.5% accounts for very little and is unlikely to have any significant direct impact on the economy.

Coming to your argument: We can well define what is productive. Anything that makes more or helps in increasing productivity is a productive asset. Gold that sits in a vault produces nothing and neither does it help in producing anything. It sure might retain its purchasing power and might be good for an individual entity, but not for the country as a whole.

Gold loan is an interesting case. You borrow against your gold holding and start a business, hire people, create jobs, etc. The loan is used for productive purpose. But if you notice, the loan made available against gold comes out of the pool of domestic savings, meaning another investment gets 'crowded out' by the gold loan leading to (maybe) no net benefit to the country.

This gold is purchased out of earning,except in case of Bloody Netas. Further it goes into an Industry called Mining and Bullion Trade, which employs millions of workers as Goldsmith, sales staff,miners etc. To clear any doubts I am a Finace Professional, so I have no direct interest. The thing is Govt has to look at ways of leveraging this assets by offering secured Loans.