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Long-term factors
1.5
Rising incomes have a positive effect on Indian gold demand and
higher gold prices have a negative effect
Gold demand and household income Gold demand and gold price
billion
Forecast for Indian population
by 2030 +1 %
-0.5%
Indian culture supports gold As the population becomes more Higher household incomes
demand across religions urbanised, earning power increases boost gold demand
Short-term factors
2
gold demand by 0.5%
1
-1
Investors around the world turn to In the first half of 2013 Rupee gold A good monsoon can increase crop
gold to protect against inflation. ‘13 price fell 20%, while consumer yields, sweep money into the rural
India is no different. demand leapt 37% year-on-year. economy and boost gold demand.
Chart 5: Top ten states by population Chart 6: India's population distribution reveals an
abundance of youth
Millions Millions
250 300
These two states
are equal to the US More than 45%
250 of people are under
200
the age of 25; this
demographic dividend
200 will boost India's
150 economy
150
100
100
50
50
0 0
0-14 15-24 25-54 55-64 65+
h
ra
at
ga
ha
ak
es
es
es
ad
ha
ht
ar
Age group
en
Bi
at
d
ad
ad
st
uj
as
ra
rn
tB
ja
G
il
Pr
Pr
ar
rP
Ra
Ka
ah
es
ra
Ta
Male Female
tta
hy
M
dh
U
ad
An
Source: Ministry of Home Affairs Census 2011; World Gold Council Source: CIA World Factbook 2015; World Gold Council
9 Census 2011.
10 CIA World Factbook, 2015.
1,200
800
600
400
200
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Rural population Urban population
Source: World Bank; World Gold Council
11 The Handbook for the Indian Economy, Chetan Ghate, Oxford University, 2012.
12 East Asia was one of the world’s fast growing regions during the 1980s and 1990s, in terms of GDP and GDP per capita.
This is often referred to as the East Asian miracle.
13 World Bank.
14 www.worldbank.org
15–20%
India itself. Population growth in smaller towns and
semi-urban centres has outstripped that in metros,
supported by better infrastructure, stronger road and rail of population
connectivity, and improved communications.
Chart 8: India’s trade deficit increased following trade liberalistion in the 1990s
Rupees bn
2,000
-2,000
-8,000
-10,000
-12,000
1988-89 1994-95 2000-01 2006-07 2012-13
Total trade balance Oil Non-oil
Source: Director General of Commercial Insights and Statistics; World Gold Council
Chart 9: Gold imports in India Chart 10: India's current account deficit
Rupees bn % Rupees bn % of GDP
3,000 20 1,000 2
2,000 -1,000 -2
1,500 10 -2,000 -4
500 -4,000 -8
0 0 -5,000 -10
1996-97 2002-03 2008-09 2014-15
5
3
1
5
-0
-1
-0
-0
-0
-0
-1
-1
04
12
00
02
06
08
10
14
20
20
20
20
20
20
20
Source: Department of Commerce; World Gold Council Current account deficit, Rupees bn
Current account deficit as % of GDP (rhs)
Source: RBI; Economic Survey 2015-16; World Gold Council
Chart 11: Indian CPI% change per annum Chart 12: Agricultural sector declining contribution
to GDP (value added, % of GDP)
YoY% change % of GDP
16 50
8 25
20
6
15 In 2015 agriculture accounted for
4 just 17% of GDP, but supports some
10 600mn livelihoods
2
5
0 0
1980 1985 1990 1995 2000 2005 2010 2015 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Source: IMF; World Gold Council Source: World Bank; World Gold Council
Politicians are aware of the impact a deficient monsoon There will inevitably be short-term fluctuations.
can have on large numbers of farmers and there are Consumers will respond quickly to changes in the gold
mechanisms in place to protect rural incomes in such an price and the vagaries of the monsoon will continue to
event. The government-owned Food Corporation of India play a role: a good drenching will boost demand, while a
aims to protect farmers from sharp drops in food prices, disappointing drizzle might cause the rural economy
via the Minimum Support Price (MSP). This long-standing to sputter.
scheme provides a price-floor for a number of key crops.
And of course there are risks. Any tightening in
In early 2016, Narendra Modi’s government introduced a
gold-related policies, such as the measures that have
re-vamped crop insurance scheme, which aims to reduce
recently been implemented to regulate and formalise
premium charges and increase payouts to farmers in the
the gold industry, are disruptive and will stifle demand
event of natural disasters such as drought.
in the short to medium term (please see Chapter 10 for
a discussion of gold policy).
27 Indian Council for Research on International Economic relations, Is manufacturing moving away from India’s cities, 2012.
28 Credit Suisse, India Market Strategy, The great Indian equalisation, 19 April 2012.