The Indian government has been trying to reduce its citizens’ demand for imported gold through a number of means over the last few years. This is part of a wider crackdown on currency used in the black market, that included the withdrawal and replacement of its two largest-denomination bank notes in early November. The strategy will likely have some unintended consequences if we take our cues from the events of 1910.
Growth in Indian gold and silver jewellery demand. Thomson Reuters GFMS Gold 2016 and Silver Survey 2016
Indians’ famous love for gold has created serious and ongoing economic issues for the nation. In 2011, Australian investment bank Macquarie estimated that 78% of India’s household savings were held in gold.
In effect, this means that India has a dual currency system where people choose to save mostly in gold rather than rupees. This is unlike any other major…