India’s recent woes include unusual drought, a massive electric outage, and a persistent economic downturn. “India’s growth is slackening, its national deficit is growing, and inflation is rising after having fallen between early 2010 and early 2012. Plans to build a more inclusive nation are in disarray. Income equality has risen,” wrote Pratap Bhanu Metha in the current issue of Foreign Affairs. “And access to basic services, such as water, health care, and sanitation, remains woefully inadequate.”
India, however, is suffering from another blow. The Wall Street Journal recently reported: “A sputtering start to this year's monsoon rains has forced farmers in India to put their gold-buying plans on hold.” Reporters Tatyana Shumsky and Biman Mukherji wrote: “With crops wilting without the heavy seasonal rains that usually start in June, some farmers say it is unlikely they can afford the gold jewelry that is the centerpiece of most Indian weddings.
As the world's biggest consumer and importer of gold, India helps set the direction of gold prices. The root of much of the demand comes from India's countryside, home to hundreds of millions of farmers who often bear the burden of adorning their daughters, nieces and sisters with solid gold necklaces, bracelets and earrings.
The Bombay Bullion Association, India's main gold industry group, estimates that the volume of the country's second-quarter gold imports slid 60%, to 128 tons, from the year-earlier period, due largely to the weak monsoon so far. Before the start of rainy season, the group forecast a roughly 20% drop in gold imports for 2012, due to a weaker rupee, which makes gold more expensive for buyers in India, and widespread closings of jewelry stores earlier this year to protest new taxes. Now, it is projecting a drop closer to 40%.
Ironically, India’s appetite for gold has contributed to its current economic problems. According to the Business Standard, “India's huge gold imports in the last financial year at $60 billion was partially responsible to high current account deficit, Prime Minister's Economic Advisory Council Chairman C. Rangarajan has said.”
It has been a bad summer in so many ways for the populous subcontinent. India’s gold woes were reflected by the country’s performance at the London Olympics. Hopes for a gold medal performance by freestyle wrestler Sushil Kuma, a railway worker, were stymied by Japan’s Tatsuhiro Yonemitsu. Kuma had to settle for a silver.
For Indians awaiting marriage, settling for silver is not acceptable. For the world at large, settling for anything less than the gold standard should be equally unacceptable.