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  • Category: Finance and Investments

    Gold Deposit by people - to raise Indian Economy?

    Have a hypothetical query about changing Indian economy by getting all people to deposit gold for ten years without interest? Looking out for a plausible answer? find advice from ISC experts here.

    For an argument: if all Indians hand over all their Gold items to Govt of India for 10 years for a long term deposit without interest.
    Will Indian currency face value increase (i.e.) Per dollar - Per Rupee. Is it possible? How can the Gold deposit raise our economy?
    Please explain.
  • Answers

    6 Answers found.
  • In earlier times a Government was valued as per the gold deposits it had in its coffers. At that time even printing of the currency notes was related to that amount of gold held by the Government.

    Today a Government is known by its GDP and the volume of exports by which it earns valuable foreign exchange. So simply depositing gold by the citizens will not be much useful. What is required is productive contribution of the citizens in increasing the GDP and infrastructural growth of our country so that we can produce much more than our requirement and at the same time export all that surplus to other countries and earn valuable foreign currency to buy precious commodities like oil and gas for our consumption.

    Even if we hypothetically think of such a situation where all the gold is deposited with the Govt and we sit back idle thinking that we have done our part, soon we will be a poor country as all the gold will go out in simply buying the petrol, diesel and other petrochemical products. So what is required is giving our hard work and dedication to our nation in whatever capacity wherever we are working and contribute to the production and increase productivity. That will be the real gold in possession of the Government.

    Knowledge is power.

  • Nowadays the currency values in the international market are not depending on Gold reserve . They depend on lot of factors like the import-export surplus, the political stability n the country, the plans and actions of the country towards favouring business and funds flow,the general financial situation of the major banks,the regulator mechanisms etc. So just by depositing all gold with government alone does not make our economy grow.
    It needs more and more productive ventures in manufacturing, trading and services to come, unemployment to go down, productivity and gross income to increase,political actions and visions along with stability etc are needed. Government should get good revenue by taxes and other ways, investment should increase , people's purchasing power to increase etc.etc. To economic growth, there needs initial infrastructure growth also.

  • If we deposit all the gold we have in the banks also I don't think will raise in the Indian Economy.
    For a better Economical position, the country should export their products to other countries.
    Wealth is to be created by value addition.
    We should encourage products made in India and discourage foreign products.
    Foreign investments should be encouraged.
    The outputs of the educational institutes should be quality products and should be able to contribute to the development of the country.
    If we deposit the Gold, it will not do any useful work for the government. But the points told above may improve the economy.

    always confident

  • Gold traditionally was an important asset for every country that is involved in international trade, lend and borrow money from other countries. A huge gold reserve would imply a strong and robust health of a country's finance and economy.

    This has changed now. The health of a country's financial status is based on its trades, it's overseas investments, overseas bonds and some investments in gold or other precious commodities.

    The concept that if we have more gold, then the value of the ruppee will go up or the value of the dollar will go down is not true. This is simply because, there are not many countries who would accept gold as against the dollar for regular day to day international imports. Similarly, we cannot just accept gold as payment for our exports to other countries because we cannot use gold as an instrument of internal payments too.

    Giving our gold to the country for 10 years would not make much of a difference because it has to be given back. Instead, we need to find a way to reduce imports and improve exports, be self sufficient, curb the black market or the parallel Indian economy, improve productivity and efficiency. All these and more would help in reduce the need for borrowing by India, reduce our international debt and strengthen the economy. For our rupee to be stronger we also need to invest diversely and smartly in US dollar, upcoming economies and international bonds.

    The only important role if we have a huge gold reserve is, at times of crisis wherein a country's economy has collapsed ( like Venezuela), the government can slowly use the gold reserve to pay of debts or pay for essential imports to keep the country afloat.

  • Thank you Shri Natarajan, Shri Umesh, Shri Venkiteswaran and Dr.N.V.Srinivasa Rao for your kind reply.

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