gold economy connection
PM Modi made some appeals to save forex reserves amid global tension. He asked the countrymen not to buy gold for 1 year. Since then the market of discussions regarding gold is hot. The thought coming in everyone’s mind is how much ‘gold’ this gold is. The practice of wearing gold jewelery is very old in Indian tradition. The result is that Indian families have about 25 thousand tonnes of gold deposited. Some of these are in homes and some are in lockers. Experts believe that in such a situation, if only Indians sell 2-3 percent gold from their reserves, the economy will get a lot of support. There may be a decline in import bill. With this the country’s reserve will also be safe. Gold will not have to be imported from outside in the market. How will this happen. What benefit will this actually bring? What are the options other than investing in gold? Let us understand all these in details.
In India, people have had a special attachment to gold for centuries. But now the discussion is not just about buying more gold, but about using the already existing gold in a better way. Its objective is to reduce India’s increasing import bill and strengthen the economic condition of the country. Keeping this in mind, the government also increased the import duty on gold from 6% to 15%. India is the second largest gold purchasing country in the world after China. Every year India imports about 600-800 tonnes of gold. Gold has always held emotional and cultural significance in Indian families, but now experts believe that people should think about how they keep and use gold.
From emotional assets to productive wealth
According to Preeti Rathi Gupta, founder of Lxme, in an ET report, a lot of gold is lying in lockers in Indian homes and is not used properly. At the same time, people are also looking for ways to generate good returns and long-term wealth. Women should think whether they can get more benefit by selling some unused gold with them, monetizing it or investing in options like digital gold, gold ETF or Sovereign Gold Bond instead of physical gold. He says that the aim is not to end the emotional attachment to gold, but to utilize one’s wealth in a better way.
How will gold support the economy?
In the last few years, there has been a sharp rise in the prices of gold. In such a situation, wealth advisors believe that instead of continuously buying gold, people should also book some profit. This simply means that people should not just hoard gold but should sell it along with the rising rates.
In an ET report, Firoz Aziz, Joint CEO of Anand Rathi Wealth, said that if Indian families sell even just 2-4% of their gold, the country’s dependence on gold imports can be significantly reduced. He said that people talk about profit booking in equity i.e. earning from stock market, but there has been a big rally in gold also, hence profit should be made there also.
If gold imports are reduced, the impact of India’s foreign investment (FII) outflow can also be balanced to a great extent. If the confidence of foreign investors increases, there will be positive sentiment regarding the economy as well as the rupee. All these are connected to each other. The performance of the economy also does not depend on just one factor. Therefore, in the current environment, small steps and sentiments can be beneficial for him.
Are there better options than gold?
Experts say that gold is definitely a good safety asset in difficult times, but in the long run its returns are not always better than other investment options. According to Firoz Aziz, the average return of gold on a 10-year basis has been around 8.5%, whereas many other assets can also give the same or more returns. Giving an example, he said that a scheme like Sukanya Samriddhi Yojana has also been giving returns of about 8.25% after tax.
Shift from sentimental saving to strategic investing
Financial planners say that now the question is not whether Indians should keep gold or not, but how much gold should be kept and in what form. Instead of continuously buying physical gold, investors should maintain a balance with equities, SIP, mutual funds, retirement products and other long-term investment options.
Overall, if put in simple words, the bottom line is that there is no special point in just keeping the gold in the locker and looking at it. If you get good money then it is better to sell it. Due to this, less gold will have to be imported from outside the market and this will have a direct impact on the import bill.
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