There are several reasons why Indians buy so much gold:
1. Cultural
significance: Gold has a significant cultural significance in India, and is
often given as a gift for special occasions such as weddings, festivals, and
religious ceremonies. It is also considered a symbol of wealth, prosperity, and
good luck.
2. Investment:
Gold is considered a safe and stable investment option, particularly during
times of economic uncertainty. Many Indians prefer to buy gold as a hedge
against inflation and as a way to preserve their wealth.
3. Lack
of trust in other investment options: Many Indians lack trust in other
investment options such as stocks and bonds, and prefer to invest in tangible
assets like gold.
4. Lack
of financial literacy: Many Indians lack financial literacy and are not aware of
other investment options that could be more profitable in the long run.
5. Lack
of access to other forms of investment: Many Indians, particularly in rural
areas, have limited access to other forms of investment such as stocks and
bonds.
6. Lack
of banking facilities and trust in the banking system: Many Indians,
particularly in rural areas, have limited access to banking facilities and may
not trust the banking system enough to deposit their money in it.
7. Gold
is a liquid asset: Gold can be easily converted into cash, making it a liquid
asset that can be used to meet unexpected expenses or to invest in other
opportunities.
Overall, the reasons why Indians buy so much gold are
multifaceted, with cultural, financial and practical reasons playing a role.
The Gold Monetization Scheme (GMS) launched by the
Government of India in 2015, has several important features that make it an
attractive option for individuals and institutions to deposit their gold
holdings:
1. Flexibility:
The GMS allows individuals and institutions to deposit their gold in various
forms, such as gold bars, coins, and jewelry. They can choose the tenor of the
deposit, ranging from 1 to 12 years.
2. Security:
The GMS provides for the safekeeping of the deposited gold with the Reserve
Bank of India (RBI) or any other approved agencies, ensuring the security of
the gold.
3. Interest:
Depositors will receive interest on their gold deposits. The interest rate is
decided by the RBI and is linked to the prevailing domestic gold price.
4. Tax
benefits: Depositors will be eligible for tax benefits under the Income Tax Act
for the deposit of gold under the scheme.
5. Liquidity:
The GMS provides depositors with the flexibility to withdraw their gold deposit
prematurely, or to take a loan against the deposit.
6. Transparency:
The scheme ensures transparency in the process of acceptance, purity testing,
valuation, and credit of the gold deposited.
7. Encouraging
recycling of gold: The scheme encourages recycling of gold and reduces the
dependence on imports.
8. Helping
the economy: The scheme helps in reducing the current account deficit and
reduces the dependence on foreign exchange.
Overall, The GMS is aimed at reducing India's dependence on
imports of gold, to mobilize the idle gold held by households and institutions,
and to provide an alternative to buying physical gold.
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