Gold is one of the fastest-growing and volatile forms of investment. The per gram gold rate in 2010 was Rs 1800/- and has reached the Rs 5000/- mark in 2020, creating a difference of Rs 3800/-, which gives a profit of 36%.
As gold is a highly liquid asset and many Indians buy it for various purposes such as jewelry or investment, gold nearly contributes to everything, which includes the huge market of employment created by goldsmiths, miners, refiners, the sales executives in gold shops, and the income created to the billion jewelers in the economy. Gold is also regarded in high forms of reserves in the Indian reserve maintained by the government.
The gold loan is another popular aspect where lenders are charged with higher interest giving a chance to NBFC and Banks to make huge profits. The import duty charged by the government on gold is also on a higher side; this also, in turn, affects the economy.
Most of the gold imported is stashed and stored in lockers, making it an idle asset but which can also be termed as hoarding it, which in turns raises the actual demand required and to curb this demand, the government must import the gold, all these steps massively hit the economy figuratively.
One of the lesser-known reasons for Indians buying gold in such huge quantities is also that gold is one of the best trading options in the black market, known as gold smuggling, which is illegal and wrong but still on a colossal scale. The government has taken every measure and is successful to an extent, but still, a chunk of the smuggling market remains and affects the economy badly.
Thus, we can say that gold impacts the economy in both positive terms and negative terms.
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