Thursday, August 9, 2012

Indian Finance Minister - We need to spread financial literacy

First I had heard that any Indian lacked financial literacy.

In fact the average annual price change for Gold priced in Indian Rupees has averaged positive 18.5% over the last 10 years. How "financially literate" would you have to be to earn the same or better than 18.5%?  I suppose you could have invested in shares on the SENSEX exchange 10 years ago and if you managed to match the index you would be up 400% + dividends or you could have just slept easy and bought gold and been up 500%. 

So it seems the Indian trade of year is yet again to go long Gold and short Government advice.


Original source

The Indian government is at it again. Worried that the flow of savings is moving towards investment in gold, India's Finance Minister P Chidambaram has said there is a need to spread financial literacy to encourage people to invest in market instruments and not bullion.

This was followed by the Prime Minister, Manmohan Singh, laying down policy decisions to direct the shift of investment towards insurance and mutual fund schemes.

In the first two months of 2012, gold purchases in India jumped 35%, impacting investments in other instruments like the stock market, mutual funds and property. The government has said it would prefer savings to be invested in "more productive assets" that would help boost the growth rate.

Unveiling a broad roadmap for putting the Indian economy back on a high growth path and regaining the confidence of investors, the Finance Minister has promised steps to achieve fiscal consolidation, price stability and stimulate investment.

"In 2007-08, savings touched 36% of GDP. It is now down to 32% of GDP. One of the reasons may be a perceived lack of attractive investment opportunities and instruments. Hence the attraction of gold, but gold is not a productive asset and the demand for gold worsens the current account deficit. Both the mutual fund industry and the insurance sector have turned sluggish. In the next few weeks, we will announce a number of decisions to attract more people to invest in mutual funds, insurance policies and other well-designed instruments,'' the Finance Minister said.

Earlier, the Minister had said, ``The time is ripe to motivate our educated upper middle-class to climb from savings mode to wealth generation mode.''

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