The Wisdom Of Our Ancestors
April 7, 2012 3 Comments
Here is an excerpt from an interesting from the interesting article here:http://tsr.net.co/2011/07/sone-ki-chidiya-india/911
India is one of the largest importers of gold in the world. As per World Gold Council, a total of 158,000 tonnes of gold have been mined till date. Out of this Indians’ private holdings is considered to be the highest at 15,000 tonnes. American citizens’ holdings is a mere 4000 tonnes.
The estimates of private holdings with Indian citizens vary from 15,000 tonnes to 25,000 tonnes. Even accepting the lower estimate of 15,000 tonnes at current prices of approx US $ 1500 per ounce, the valuation of the Indian private holdings is equal to US $ 725 billion.
India’s GDP is around 1.5 Trillion US $. If our economy has a growth rate of 8 %, the GDP increases by US $ 120 billion. In the last one year, gold has appreciated from approx 1250 $ per ounce to 1500 $, an appreciation of over 20 %. In view of the rupee getting stronger against US $, the appreciation in rupee terms is lower at about 15%. If the above rate is applied to the Indian household holdings of gold, the value of Indians gold holdings has gone up in the last one year by about US $ 90 billion.
The Indians thus effectively enjoyed an equivalent of 210 Billion $ of additional income, i.e, equivalent to a GDP growth of 14%. Whereas, the growth rates in GDP are visible and translate into more economic activity, the increase in the value of holdings due to the price increase of gold is not visible.
As per an estimate by the Chairman of Manappuram General Finance, the three southern states of Kerala, Tamil Nadu and Andhra Pradesh account for 40 % of India’s household gold holdings. Most South Indians would know the importance and value attached to gold in most families, particularly at the time of weddings and distribution of family wealth.
As per an estimate given in 2ndlook, the average gold holding in India of a household in the High Income group is 500gm and every household in the High Mid-Income is 100gm. In the Mid-Income group it is 50gm per household. For South Indian households this average is likely to be atleast 50 % higher.
The price increase of gold in the last five years from 600 $ to 1500 $, means that the value of the gold holdings in every household has multiplied two and a half times. The gold holdings of a high income household in South india is now worth Rs 9 lakh more and a High-Mid Income household is worth Rs 1.8 lakh more.
So instead of cribbing about the rising inflation and declining growth rates, it is time to celebrate the ‘wealth effect’ that our gold holdings have generated. By doing nothing and keeping those gold ornaments in the bank lockers, we have become richer.
Also it is time to acknowledge the wisdom of our ancestors, who firmly believed that gold was the ultimate hedge against inflation and best way to store wealth.