7 Apr, 2013
India’s rich are the problem – The Hindu
The import bills on account of both oil and gold do not seem to fall much despite rising prices and slowing GDP growth. A feature of both these commodities, especially gold, is that it is the rich that largely account for the growth in their demand. Over the year ended September 2011, demand for gold in India was 1059 tonnes, as compared with 214 tonnes in the US and 770 tonnes in China, whereas per capita income in the three countries stood at $1,410, $48,620, and $4,940 respectively. The “average” Indian could not be responsible for such “excess demand” for gold. It is the rich who are clearly responsible.
The incomes of the rich are not affected as much by the slow down. And, the demands of the rich are relatively inelastic or non-responsive with respect to price changes. This structural feature influencing India’s import bill is what accounts for the asymmetry in the response of exports and imports to world and domestic incomes respectively. What is needed is an effort at curbing such elite consumption. While this may be difficult to implement through physical controls in the case of oil, it can easily be done in the case of gold.
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