Macroeconomic impact of gold in India: A report on effect of gold on macroeconomic policies of Indian government and the way forward

Abstract

India's love affair with gold is not new. However, what has happened over the last few years is that rising gold imports have coincided with a rise in its prices and a weakening of the rupee against the dollar. The combined impact has served to widen the current account deficit (CAD). As an emerging country that has previously suffered balance of payments crisis, India is bound to control its CAD numbers to signal optimal investment opportunities. Through this project we propose to study the impact of gold imports on CAD and further evaluate the measures taken by the government to control the same. We further delve to determine the drivers of gold prices and thus possibly formulate new strategies of addressing India’s Gold problem.