Economy

India's Insatiable Appetite For Gold And Why It Threatens Its Economy

"Gold is part of India’s DNA"
"Gold is part of India’s DNA"
Frédéric Bobin

NEW DELHI — He wears a badge, and his slightly wrinkled light blue uniform has epaulettes. But the security guard casually seated on a chair at the entrance to this jewelry store in a New Delhi mall, old gun in hand, doesn’t exactly look like the deterrent type.

In the shop window, display busts have their necks draped with golden and silver necklaces, some with diamonds. Inside the shop, a succession of glass counters, each filled with more sparkling pieces than the next, leads to the office of owner Ramesh Narang, who wears a formal pink handkerchief in his jacket.

Narang is not just a jeweler. He’s also a patriot. “We’re ready to help the nation,” he says cheekily. Although selling gold is how he earns a living, he admits that it has now become a dangerous threat to the Indian economy, and he and other Indian jewelers have committed not to sell gold in certain forms so as not to exacerbate the situation.

The massive imports of gold — a direct consequence of the Indian hunger for the yellow metal — have indeed put a heavy strain on the country’s commercial balance. While the rupee is crumbling amid economic slowdown, the government spares no efforts to try and curb its citizens’ appetite for gold.

The latest export figures, which were published at the beginning of the month, are encouraging. In September, gold imports fell 82% compared with the previous year. Officials admit, however, that the situation is still uncertain. New Delhi desperately needs Narang’s patriotism. At the end of the 2000s, India imported 1,000 tons every year, representing one-third of global imports.

This frenzy has a high price tag: In 2010-2011, $40 billion was spent buying gold from abroad, which represents 10% of the country’s total imports. Therefore, when the rupee started to weaken dramatically in 2012, the authorities sounded the alarm and developed a new plan: keep savings away from “unproductive” investments — said Finance Minister Palaniappan Chidambaram — and direct it toward financial products that support the economy. Customs duties on imported gold bars were thus multiplied by five, going gradually from 2% to reach 10% during the summer.

To participate in the national effort, and despite its opposition to the customs duty increase, the India Gems & Jewelry Trade Federation decided to stop selling gold bars and golden coins to individuals, thus reducing the jewelry trade. “We are reasonable people,” says Narang, who is also one of the Federation leaders. “We want to contribute to the national effort.”

Gold “part of India’s DNA”

But that won’t suffice if the country is to deter a desire that is deeply rooted in the Indian psyche. “Gold is part of India’s DNA,” Narang says with a smile. “They’re inseparable,” confirms Kewal Duggal from the Gems and Jewelry Export Promotion Council.

India used to have such large reserves of gold that it was nicknamed the “Bird of gold,” as a result attracting many greedy invaders through its history. In the Rigveda, one of the four canonical Hindu texts, the cosmos was born of a gilded uterus. And in the Hindu Pantheon, many gods are brocaded with gold, as the metal symbolizes the mind’s superiority over ephemeral bodies. Buying gold is therefore a way of attracting the gods’ favors, especially from Lakshmi, Vishnu’s wife and goddess of wealth and prosperity.

In the southwestern state of Kerala, people add powdered gold to the honey that ends up in a newborn baby’s mouth, to ensure the child’s good fortune. As for the dead, mourners place a couple of coins in their mouths so that they’re not without resources in the afterlife. That’s not all. The 10 million weddings celebrated each year in India are yet another opportunity for the precious metal to shine. “Not offering gold as a wedding gift is a social mistake, a lack of taste. It damages your status,” says jeweler Rahul Gupta.

In fact, there are as many chances to buy gold as there are Hindu celebrations. But two dates are particularly important. The first one is Akshaya Tritiya, during which Hindus celebrate the day Ganesha — the god with the elephant head — began writing the Mahabharata, one of Hinduism’s mythological epics. The second is Dhanteras, a day of celebration to the glory of Lakshmi.

A means of security

There is now, however, another reason besides mythology for this frenzy, and it is linked to the search for financial security. To buy gold is to protect oneself ahead of difficult times — a reaction rooted in the country’s collective unconscious after centuries interspersed with invasions, wars and the chaos these brought.

Ramesh Narang tells how his family was saved from poverty thanks to the jewelry that his grandmother took with her when she was forced to leave Lahore (now in Pakistan) during the bloody partition of the British Indian Empire. “The family fled for New Delhi, and it survived there thanks to the jewels,” he explains.

Although the context has since changed, this fear of instability still exists today, as the economic situation is increasingly unpredictable. “People see gold as a safe asset, unlike other properties,” says Jayati Ghosh, professor of economics at New Delhi’s Jawaharlal National University.

Over the last few years, gold has even become a speculative investment, particularly among the urban upper class. This unprecedented evolution is bad news for the government, because the demand increases when prices go up as a consequence of higher customs duties.

It is therefore important that the authorities remain cautious even if official figures indicate a massive drop in gold imports. Professionals admit that if indeed demand has fallen — partly due to price volatility resulting from the Syrian conflict and global recession — the drop is certainly not that huge.

The decrease must be counterbalanced by the consideration that new customs regulations have encouraged the rise of a black market. The second quarter saw a sixfold increase in the quantity of gold illegally introduced into India (generally from Dubai) and seized at New Delhi's international airport. Evidence that the Indian "Bird of gold" still flies high in the sky with the gods.

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Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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