Simple way to reduce India’s growing Trade Deficit – stop buying gold!!
May 1, 2012 Leave a comment
As of April 2012, India’s Exports are at an all-time high of $300 Billion. But the problem is that Trade Deficit is also at an all-time high of $ 180 Billion. This is serious problem as it is threatening to undermine India’s growth.
One obvious reason for the Deficit is Rising Oil prices. From 2000 to 2012, there has been a phenomenal increase in oil prices – 1970s was the only other time when it grew more. In the current World Politics, India cannot do anything about it in the short term. In the medium to long term, India needs to invest aggressively in renewable energy sources like Solar, Wind and other alternative sources like Nuclear (if the risks can be managed carefully).
But can we do something simple in the short term to reduce this problem?
Even if you spend 10 minutes thinking about the problem and researching, one answer should be obvious. India’s completely unnecessary and frivolous gold purchases and resulting gold imports is one of the major reasons for the Trade Deficit. If we completely cut out Gold imports, the huge Trade Deficit can be brought down by 30%.
There will be many objections to such an idea:
Objection 1) Gold is the only real saving. See in difficult times, Gold value goes up.
Answer 1) But Gold’s “supposed” value is only because people think it is useful. It is practically useless. Let us spend the money on something useful – education, health, infrastructure or even basics like drainage. “Let us build Sewage Drains instead of Golden Chains“!!
Objection 2) But if everyone sells Gold, then value of Gold will go down causing people’s savings to go down.
Answer 2) Most people dont do anything useful with their gold savings anyway. Let them at least, invest the savings into something more useful. Even spending the money on something else and not saving is better than saving in gold. In anycase, there is enough gold in India already that even if people just continue to circulate the gold that is already in the country, there will be enough gold for a long time.
Objection 3) What if countries go back to the Gold standard? India can be the richest country in the World!
Answer 3) Ask any reasonable economist. The World economy is not going back to the Gold standard. No matter what happens – severe depression, recession due to natural calamity or huge war, there is no chance the world is going back to a Gold standard.
Can we make a pledge – to sell unnecessary gold and diamonds and not to buy any more useless jewelry. It is killing the country. It is not worth it.
Alternatives to buying gold:
– Buy a solar panel instead. It is equally shiny and will give you useful electricity during those power-cuts.
– Buy some native handicrafts – handloom, pots. It will help poor artisans and keep art alive.
– Buy better food – organic, locally grown. It will help farmers.
– Buy books, ebooks, computers, internet access. It will help you.