Once again, Finance Minister P. Chidambaram has appealed to the people of India to keep away from gold. As the finance minister, Chidambaram thinks buying gold hurts the nation. But as a lawyer, perhaps he would see no wrong if gold is imported for gain. On June 7, 2003, Chidambaram had given legal opinion to a gold dealer (Gold Quest International Limited) that the State Trading Corporation of India was contractually bound to import supply gold to the dealer. Later, the dealer, allegedly involved in gambling, became bankrupt and investors lost thousands of crores. It became a public scandal leading to arrests and criminal cases.
Precept and practice on gold thus diverges in India. In classrooms, economists trash gold as anachronistic and celebrate stocks as real wealth yet keep their money invested safe in banks, property and gold in that order, not investing a dime in stocks. This is how Indian economic theory preaches against gold, but practice works the other way round.
Even as policymakers congratulate themselves for having controlled gold imports, they find to their horror that smuggled gold, supported by the crime world, sneaks into India. The RBI has rightly confessed that gold is not amenable to policies. Read more
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