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Greed has no gender bias

Around 2015-16, Indian business took a lot of pride on the fact that the corner office in many large banks and financial services organisations were occupied by women. SBI was led by Arundhati Bhattacharya, ICICI had Chanda Kochhar, Axis Bank had Shikha Sharma, Usha Ananthasubramanian in PNB, CRISIL had Roopa Kudva , NSE had Chitra Ramakrishna and a few more at one level lower and smaller organisations.

Now almost all of them have left their positions and mostly replaced by men.

I am sure all of the women got there on the basis of their competence and leadership skills. They would have competed with men and proved themselves over a long period to get the top job. As women it would have been tougher because of the obvious biases in largely male dominated boards of directors and other difficulties of managing family and work.

One comment I have often heard in favour of women is that they are clean and they are not part of typical cliques of men that operate at the top of many organisations. As many women, rarely take part in after office gossip and spending time together at clubs or watering holes, it is assumed they are not part of these boys networks. Also, many successful women have equally successful husbands, so there is no real need for extra money earned through dubious means.

Many of these women leaders usually have a no-nonsense approach outwardly that it would appear that no one would have the courage to make offers that bend the rules or those that are outright illegal.

The above is slowly coming out to be just a perception and not reality. Women are as vulnerable as men to enticements of different kinds, particularly quick big money. Some of them, just like men are part of networks that does dubious deals. If one goes into the murky details of the scams where Chanda Kochhar , Usha Ananthasubramanian and now Chitra Ramakrishna are involved, the above becomes clear.

Integrity and character are as rare in women as they are in men. Just because we did not see many women in top jobs, we did not have adequate examples, so we carried a wrong perception.

I am not saying that women are more corrupt than men. All I am saying is do not mix up gender with character. The same minefield of corporates and rat race that make many a men compromise their values, forces women to do so also. The same greed that makes men to put a hand in the till tempts women also.

We the public and media made every woman at the top a role model. They better live upto that else, it is very unfair to all the young girls and boys who look upto them.


  • Posted by G.Mohan in Facebook on 2nd May 2019 

A Brief History of Indian Time

One grouse I have about our history textbooks is that it has too much information about rulers, dates, wars and very little historical information about important aspects of everyday life.

Time for instance. We in India from my generation and later, assume that Indian standard Time ( IST) was a given and it was always so. Often while dealing with Americans we find it odd that they do not have a US standard time. We think their six time zones ( 4 in the mainland ) coupled with complications of Daylight savings time are unnecessary complexities or ‘nakhras’.

It is not. Back to basics. The earth is divided into 360 degrees of longitude. In one hour the earth travels 15 degrees, India with its 29 degrees breadth in longitude, ought to be having atleast two time zones. The sunrise in the western most tip of India would be two hours after the Eastern most tip.

India did have multiple times in British India. Bombay Time, Calcutta Time, Madras Time , Port Blair Time and Indian Standard Time. Interestingly, way back in 1802 , an observatory was set in Madras and the Madras time was the first one established by John Goldingham , the official astronomer of East India Company. In 1884, after an International Conference in Washington DC, India was divided into 2 time zones, Bombay Time and Calcutta Time. Calcutta Time was One hour and 3 minutes ahead of Bombay Time.

Before the British came there was no need for an Indian Time. British by establishing Posts and Railways connected the various parts of India and hence they had to come up with an agreeable standard, else there would have been chaos.

Indian Standard Time was established on 1st January , 1906 . This was 5 hours 30 mins ahead of Greenwich Mean Time. Geographically, it passed through 82.5 deg E in Mirzapur , UP.

Even after establishing IST, India continued to have multiple time zones. Bombay Time continued till 1955. Bombay Time was 39 minutes behind IST. Railways used to follow the time tables as per Madras Time, as it was in between the Calcutta Time and the Bombay Time. . So , Madras Time was also known as the Railway Time of India.

After independence , the government decided to adopt Indian Standard Time as the official time. All India Radio was used extensively to broadcast to the public so that the people could set their clocks and watches. If we the people, made IST as Indian stretchable time, please do not blame the government for that 


  • Posted by G.Mohan in Facebook on 30th April, 2019 

Will Bollywood be able to avenge the Avengers ?

Avengers: Endgame has got the best opening for any film this year in India. In the first two days it has crossed the important Rs 100 crore mark, even before the weekend is over. Only Bahubali 2 had a bigger opening.

Avengers : Endgame, has been released in 2800 screens across India in 4 languages namely Hindi, Tamil , Telugu and English. The number of screens is lower than Bahubali’s 6500 and Rajinikanth’s 2.0 8000 screens release. Avengers is earning more money by having shows even beyond midnight in some cities and also pricing the tickets high,beyond Rs 1000 in some multiplexes.

Avengers has a marketing budget of 200 mn $, ( approx Rs 1400 crore) the highest ever for a Hollywood film. They would have earmarked a good sum for India also. It is this promotion that has created so much expectations about the film and not just limited to the Avengers fans. The release of the film has been timed well to catch the school children just after their school exams.

Bollywood producers were surely aware of this , so no big film was released during this week. Normally Bollywood producers are undeterred by Hollywood releases but Avengers seems to have been different.

Now the typical commercial film producers of Bollywood are in a tight spot. They cannot take creative risk by producing typical Indian stories that the small producers are able to take. They cannot produce spectatcular films using big budgets because they are too small when it comes to budgets in comparison to the Hollywood studios,. The marketing budget of one film like Avengers is higher than 3 years turnover of most Indian production houses.

If they occasionally try to take creative risk by producing an Indian story mounted on a big budget by their own standards they have a ‘Kalank” on their hands 😀

Disclaimer : I have not seen the film and the above is not a recommendation to see the film.

  • Posted by G.Mohan in Facebook on 28th April 2019 

Why Indian companies are so tied to their promoters ?

Narayana Murthy says Infosys is his middle child, because it came into being in between the birth of his daughter and son.

He mentions this obviously to bring out the emotional attachment he has with Infosys, much like a parent with a child.

Not just a parent, an Indian parent. An Indian parent is in control of his child’s life, at least he/she wishes to, a lot longer than a western parent. Children are also comfortable depending on their parents a lot longer than a western child does.

Is that the reason why the western concept of promoters leaving the management control to a board is still not getting firmly established in the Indian corporate sector.?

Perhaps. Just like an Indian parent and his child’s bond is longer and deeper than a western one, the bond between founder and his company may be deeper, leading to such situations as seen in Infy and Tatas.

Promoters like Indian parents are unable to let go and the company just like Indian children are comfortable depending on their promoters. They accept them with all their faults.

Even where promoters are no longer alive or have no second generation to take management position Indian cos are looking at leaders who are more like father figures. Cases in point, AM Naik in L&T and Yogi Deveshwar in ITC.

Western concepts like fixed tenures for Chairman, retirement age are treated by most companies as just rituals. Asking a promoter Chairman when he would retire is as sacrilegious as asking a parent when he/she would die.

With rising life expectancy, even retirement ages get shifted higher and higher. When it reaches unreasonable levels say 75, then there is a brilliant idea increasingly adopted by many , Chairman Emeritus.

It is often said that the role of a parent is to give the child , roots and wings. Indian parents often fail in giving wings to their children. Similarly, if the Indian companies want to be tied to the coat tails of their promoters, it is hard to expect them to develop wings and be global in size or make some world beating breakthroughs. They would be limited by the vision and capabilities of the promoter.


Why the brouhaha about a 50 basis points rate cut ?

In the last couple of days, a message has gone viral on Whatsapp where Santa and Banta have a conversation on the concepts of interest rates, inflation, repo, reverse repo rates. Well explained. If you have not read it already, you can read it here. When I first got it, I thought it will have some twist or humour in it, but it was pretty plain. Khushwant Singh, the creator of Santa and Banta, wherever he is up there, would not be amused.

These days, so much hullabaloo is being made out of monetary policy announcements. I know, RBI has been formulating monetary policies ever since they have existed. Monetary policies never used to get the top media coverage like the Union budget. In the past, twice a year RBI used to announce their policies quietly, which were tracked by the bankers and to a limited extent by the financial press. Even if they have become more important in a market-driven economy, do they really require everyone to be bothered so much. Regular newspapers and news channels of all kinds build hype about what RBI Governor would do in the next RBI policy announcement. These events have become bi-monthly, thereby making them more frequent. Two weeks of media content, one week before and one week after, is created every two months by this rather boring economic event. Speculations begin about whether there would be a rate cut or a hike or no change ? If a cut or a hike is expected, the extent of cut is speculated. How many “basis points” would be the cut or a hike ?

I first heard “basis points” in my second year MBA elective course Global Financial Services. Our Professor while teaching us Interest rate swaps, told us in the western world where interest rates are low and also they deal with billions of dollars, a smaller unit called “basis points” is used instead of the more common percentage. It is a unit limited to the treasury rooms and derivative traders of Wall Street and other financial hubs.

The way basis points are being used by Indian media today, it appears that if you do not know basis points, you do not what is going on around you. I suspect, when the curriculum is rewritten of middle school mathematics, “basis points”would be taught in the chapter on percentage.smile emoticon

Is this building financial literacy or is it pushing some one’s agenda ? I suspect the latter.

In the recent RBI policy announcement, Governor Rajan cut the Repo rates by 50 basis points. The industry leaders and stock markets were expecting a 25 bps cut. The media projected that Governor Rajan has given a windfall by doubling the rate cut from 25 bps to 50 bps. Instead of 0.25 %, he announced a cut by 0.50 %. The actual rate fell from 7.25 % to 6.75 %. If the headlines had been “Repo rate changed from 7.25 % to 6.75 %”, would the man on the street really bothered much. I doubt it. But when basis points are used, suddenly the cut appears huge.

The popular reason given by the government is interest rate cuts are very important because it will spur development by reducing the cost of money. Industry will borrow money to invest more and consumers will spend more by using more and cheaper credit. The biggest cheerleaders for this theory is the big business houses through the industry associations like CII, FICCI and ASSOCHAM.

In my humble opinion, the rate cut of 50 basis points, does not mean much to most of the big borrowers. The big borrowers know pretty much that interest rates written in the loan documents are not to be taken too seriously. If the big borrowers are unable to bear the high rates, bankers will come after them to do a Debt restructuring or a One Time Settlement. Despite, all the noise about the growing NPAs in the Indian banking system, as this Moneylife article says, most of the debt restructuring has happened in the Power and Steel sector where NPAs are the highest. If the banks are under pressure to do all the restructuring for the big borrowers, how do they remain profitable?

They can remain profitable, only by cutting their cost of money. The deposit rates will be brought down. All the brouhaha about a 50 basis points cut is basically a communication to the savers that get ready for lower rates on your deposits whether in Post Office or PPF or in bank fixed deposits. One of the cheapest source of funds for banks are CASA ( Current accounts Savings accounts) , the money lying in common man’s savings accounts. When the interest rates on Savings bank accounts, the announcement will not be in Basis Points. It will be a simple “ Banks reduce savings bank interest by ½ % from 4 % to 3.5 %”. The news will be in an inside page corner.

The government, the industry and the banks all are playing this communication game to make the savers lose some interest on their savings , while protecting their own interests totally.

  • Posted by G.Mohan 4th of October 2015

Why did Volkswagen managers allow the ”defeat” device ?

The VW scandal is now pretty well known. For the sake of further discussion and to find an answer to the above question, I am summarizing it based on my own understanding.

The Environment Protection Agency ( EPA) has found out that VW diesel vehicles with TDI engines have been passing the emission standards in USA using a ‘defeat’ device. This ‘defeat’ device automatically makes the engine work in the ‘test’ mode that makes the engine work in such a way that it passes the emission tests. While, during the routine run on the roads it works on the ‘normal’ mode that emits 40 times more Nitrogen Oxides (NOx) gases than permitted under EPA standards. Whereas, there have been no deaths due to these gases, studies have shown that NOx gases have harmful effects in the short term and in nearby areas leading to poor health. The Economist has quoted a study which estimates that 58,000 early deaths in US have been attributed to NOx. VW has admitted that there are 500,000 cars in USA which have the TDI engine. These devices are part of standard equipment since 2005. Some reports claim that globally there are 11 million vehicles fitted with such a device.

This is being seen as one of the biggest scandals ever to hit the automobile industry. The impact of this will not only be felt by VW, the company but automobile industry globally. Some analysts even fear that the future of diesel engines itself has come under a cloud.

The Chairman of Volkswagen group Martin Winterkorn has accepted moral responsibility for the above scandal. He has claimed that he was not aware of the existence of such a device.
If such a big price is being paid for this error, why is it that the managers allowed it to continue. I came across an old HBR article that first appeared in 1986, called “ Why “Good” Managers Make Bad Ethical Choices” by Saul W. Gellerman. According to the article there are four commonly held rationalizations that can lead to misconduct :
1. A belief that the activity is within reasonable ethical and legal limits
2. A belief that the activity is in the individual’s or the corporation’s best interests
3. A belief that the activity is “safe” because it will never be found out or publicized
4. A belief that because the activity helps the company the company will condone it and even protect the person who engages in it.

Let us now look at the VW scandal and see what rationalizations might have been at work among the managers at VW.

I doubt if the managers would not have known that passing the emission tests using ‘defeat’ software was seen as ethical or legal. Not just one or two managers, but a team of engineers and designers would have known that the company cars were clearing the tests by cheating and using clever means which were not ethical. They also knew that when the cars were going through the normal runs, they were emitting more NOx than that was permissible. They would have probably known that they were harmful, but may not have known the extent of the damage they were causing to the health of the community. It is quite possible that they would have rationalized that US standards for NOx were unnecessarily higher than the European standards deliberately to make diesel cars i.e European cars, less popular. It is likely, that other companies in the industry are also using such tactics. This could have also been used to rationalise their own actions.

The managers of VW who approved these scandalous methods were allowing it to go through clearly out of their own self interest and organisation’s interest. VW had a stated goal of becoming the largest car maker in the world, defeating Toyota. This goal could not have been achieved if the US market was not conquered. So, it is quite likely that the senior managers who had volume targets, pressurized the designers and engineers to find solutions for meeting the US EPA’s emission standards. When it was not possible, through straightforward means, the ‘defeat’ device method was used to achieve the goals. Out of their own self interest, none of the managers would have blown the whistle.
Since this tactic was going on since 2005, I am reasonably certain that complacency would have set in, that this was ‘safe’ and would never be found out. Though there is some news appearing that Bosch, one of their suppliers, had sent some communication warning the company and requesting them to stop using the practice. The managers of VW continued to use it, reasonably certain that if this misconduct was not found out for so long, it would never be discovered.

Also, the managers at VW would have rationalized that they were approving this because it was in the interest of VW and not for any personal gain, for e.g, a bribe or abuse of company resources, they would be condoned by their bosses. VW is known as a highly centralized and hierarchical organization, where most decisions flow top-down from Wolfsburg, Germany. It is quite likely, that the top management would have given tacit protection to the managers who were directly involved in the use of the ‘defeat’ device.

So the managers were ‘good’ people. They had no intentions or motives to cause such a big damage to their company or to cause serious damage to the health of the society. They were just too myopic and self-centred. Many of them would now lose their jobs. If the US law takes a harsh view of the misconduct, some may even be imprisoned. They would probably repent for not standing up or not blowing the whistle at the appropriate time. Most would blame their bosses, for asking them to chase targets and numbers, which were impractical.

As the VW managers wait for the punishment, there will be across the corporate world, managers making their own small everyday compromises with ethics, rationalizing much the same way the VW managers would have done.

  • G.Mohan posted on October 1, 2015

What if there were no currency notes or coins ?

Chief Economist at Bank of England has proposed that UK should get rid of cash completely. Imagine, our own Raghuram Rajan decides to go for such a move. What are the possible problems and solutions we in India will have if there are no currency notes or coins…Here is a non-serious list

1. What will replace Hundis and cash boxes In temples and other places of worship ?

2. How will cricket or other sports captains carry out their toss if there are no coins ?

3. How will we give bakshish, tips, alms to a waiter or a beggar ?

4. We often felicitate our politicians and also grooms with garlands of currency notes. Would we replace that with a mala of credit cards ?

5. In baraat where wads of currency notes are used to distribute cash, would people keep their Bluetooth on to give and receive money

6. What will we throw in the holy rivers like Ganga or Cauvery when we cross them in train ?

7. We often use coins to open a hard to open container , what will we use instead of coins ?

More situations and replies to the above questions welcome.

  • G.Mohan – 20th September 2015

Dearth of good quality stocks in Indian equity market

Jayant Sinha, The Minister of State for Finance, wants Employees Provident Fund Organisation ( EPFO) to invest  more of its funds in equity markets. He says “We are saying the EPFO, which always had the ability to put up to 15 per cent of its assets in equity markets but never did, has to do at least five per cent. Hopefully, over a period, it will raise it to 15 per cent,” Two days ago, pension fund regulator, PFRDA, wants pension funds to invest upto 50 % in the stock market, as reported by Financial Express.

In a country where the ownership of equities by middle class is very small, this appears to be a logical move. As per a recent CLSA report, the Indian households only own 2.7 % of their wealth in the form of equity. Property ( 58 %), Bank deposits (15 %) and Gold (12%) make up top three asset classes. Historically, Indians have been averse to investing in equity. However, in recent times this trend seems to be reversing. Business Standard in an article dated 16th September says “The RBI’s latest Annual Report says that the financial savings of Indian households rose to about 7.5 per cent of national income in 2014-15 from 7.3 per cent in 2013-14. At the same time, real estate and gold are both believed to have declined as a percentage of household savings.”

The same Business Standard article says ” There has been a very significant expansion of household assets invested with the mutual fund industry. Over 1.5 million new individual investment folios were created last year. Fresh mutual fund mobilisation in 2014-15 rose to over Rs 1 lakh crore, nearly double the Rs 53,000 crore of fresh mobilisation registered in 2013-14.As much as 84 per cent of the AUM in equity-oriented schemes is owned by individuals, who have parked 59 per cent of their overall mutual fund exposures in equity.”

The demand for equity stocks from the domestic investors is going up thanks to all of the above. In addition, India is seen as a safe haven among the emerging markets and BRIC countries by the foreign institutional investors. With the relaxed monetary policy of the US continuing, the money coming into the equity markets from foreign portfolio investors ( FPIs ) continues to go up. As per an NDTV Profit news ” Since the beginning of the year, FPIs have made a net investment of Rs 27,463 crore in the equities and Rs 38,732 crore in the debt markets.”

Based on the existing demand for the equities from both domestic and foreign investors, the stock prices are already high. Even after the recent correct corrections, the BSE Sensex is ruling at 26,000 and NSE Fifty at over 8,000 as on 18th September 2015. The current four quarter trailing Earnings per share (EPS)  for Nifty stocks is expected to be Rs 361. At 8000 Nifty, the P/E ratio works to 22 times. Based on fundamental analysis, this is in the over valued zone. The fair valued zone for the Indian markets experts consider it to be between 17x to 20x P/E.

With more money expected to enter the stock markets because of pension funds, Provident Fund and foreign funds, the future of the stock markets appears to be bright. But  before, we make any forecasts, let us look at the supply side also.

There are over 6000 companies listed in the two leading stock exchanges of India, namely NSE and BSE. The universe of good public limited companies is a small fraction of the above. Perhaps, about 100 companies. By good companies,  I mean companies that are profit making, dividend paying, have no or low debt and are showing growth in revenue and profit. Colloquially, these are referred to as blue-chips. Many of these companies are part of the indices NSE Nifty and or BSE Sensex.

The blue chip companies are pretty well known. These companies are already well owned by the domestic institutional investors like the Mutual Funds and the Foreign Portfolio investors. There is always a clamour from the FIIs to permit increase in  the percentage holding of FIIs in good companies. For example, Ministry of Finance is considering a proposal to allow 100 % foreign holding in private banks. This will allow FIIs to increase their holding in HDFC bank from the current limit of 74 % and in ICICI Bank from the current holding of 70 %.

The demand for blue chips has already pushed the prices of good companies to the over priced zone, as mentioned earlier. If Nifty is at 22x PE multiples right now, there are many individual companies which have PE multiples over 40, i.e grossly overvalued . Nestle India Ltd, an FMCG stock,  despite all the problems that arose out of the banning of Maggi noodles, is still priced at 49x. Yet, when fresh money enters the market, they go after the same blue chips raising the prices even further.

In India, in the last decade there are few new companies that have entered the blue chip league. To illustrate, let me take the information technology (IT) industry. Despite, all the technological changes and disruptions that happen in the IT industry worldwide, the number of good companies stocks in India have remained the same in the last decade. TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra. Mindtree was the last IPO of some significance that happened in the IT industry. The E-Commerce and Internet companies that have come up in recent years like Flipkart, Snapdeal or OLA prefer to raise funds from venture capitals and private equity. They may go public when there is pressure from the investors to exit.

So it is clear that there has to be some significant improvements on the supply side required for stock market investing to become less risky and reasonable before all the big money from PF and pension funds is allowed in. The government of India is keen to divest its stake in public sector undertakings. This will increase supply. But PSU stocks have lost their sheen. Some of the PSU blue-chips of the past like ONGC, NTPC or BHEL do not command the high valuations reserved for the good companies. Obviously, their performance and governance leaves much to be desired and that is the reason market has punished them. The government of India under Modi was expected to address this issue, but till now no major PSU reforms have been implemented.

The Public Sector Banks who are in desperate need of capital, can issue fresh paper. But there would be little demand for the shares of public sector banks. Most PSBs are saddled with so much NPAs, that the market is wary of investing in them. The market does not believe that the profits shown by them in the books can be trusted. Hence, the gap in the valuations of private sector banks and public sector banks has only widened in recent years.

In the last couple of years, despite the secondary market doing well, the primary market remained dull. 2015 is expected to have a few big IPOs. Already in 2015 till date, 5 IPOs of over Rs 500 crores each have been successful, as reported by this site. There is a clear need for many more. But the lead managers, rating agencies and the regulator SEBI should be careful not to allow sub-standard companies to raise large quantities of money at absurd valuations.

Isnt it an irony that a developing country, where a lot of capital is needed for growth, there is such dearth of investment opportunities.

To conclude, I can say that there is a clear supply side problem. Unless, this corrects itself through government intervention and market forces, the markets will remain overvalued. Those holding stocks of blue-chips should hold it tight, as there is a clear shortage of those. Those investing in equity mutual funds may temper their expectations as there are not many easy pickings for the fund managers in the current markets.

  • G.Mohan 18th September 2015 

Impact of Ola on car market and beyond

In the last 15 days, I have had quite a few rides in Ola Cabs, in Hyderabad and in Chennai. If I chose the Mini option, it was usually a Tata Indica. Tata Indica, the old workhorse of Tata Motors seems to be having a revival of sorts of late. I see several new Tata Indicas on road, mostly with the OLA drivers.

Ola is already doing 750,000 rides daily and is expected to cross 1 million rides every day by this month end. Uber is expected to cross 1 million rides per day by March 2016.

Ola and Uber seem to be creating ripples in the car market. So much so, that Anand Mahindra has said recently “”The age of access being offered by taxi-hailing apps like Uber and Ola is the biggest potential threat to auto industry. Since these apps operators have made transportation a commodity, (auto) sales could be hit and volumes get impacted,”

It appears that the taxi market would become a significant market for the auto manufacturers. Ola which till now was only an aggregator, has announced that it will enter into car leasing. It will be investing Rs 5000 crore to help drivers acquire cars. Drivers will have to make a small down payment of Rs 25,000 for a car. At an average price of Rs 5 lakh per car, that would mean 1 lakh cars. That is small but not insignificant share of the annual car market of 26 lakh cars in India. Also, if it is the beginning of a new trend then this share will only grow in future.

Along with Tata Motors, Mahindra with its Verito, Toyota with its Innova and Etios are established already in this market. It will be interesting to see if the biggies Maruti Suzuki and Hyundai respond to this opportunity with a new offering of their own.

If Olas of the world really take a big share as it is being expected , what do you think would be the other impacts. Will there be a drop in the value of the cars in the used car market ? If drivers can actually earn Rs 20,000 to Rs 50,000 per month as these app companies claim, will the drivers become hard to get and therefore become pricey ?

At the moment, with all the VC money that these app companies have received, they surely seem to be pricing it aggressively. When these companies, have to start balancing the books, will their users use them the same way needs to be seen. Interesting times ahead.

  • G.Mohan 15th September 2015

Do Indians really save in gold ?

The govt of India has recently come out with a scheme for Gold monetisation as well as a Gold bonds scheme. This is aimed at dissuading Indian households to stop saving money in the form of gold. This set me thinking as to what is the extent of savings Indians hold in the form of gold.

World Gold council estimates that the total quantity of gold in India is about 22,000 tonnes. If the population is taken as 125 crores, the per capita gold holding is about 17.6 grams. If we treat gold as a family asset and say there are 5 members per family, the total gold in an average household is about 88 grams. Translating into jewellery terms it may mean a thin chain (50g), a pair of bangles (30g) and 2 pairs of ear drops (8g). No big deal.

We do hear stories of families pawning their jewelleries to start a business, repay a loan or conduct a wedding. How much this average household gold can yield ? At current value this gold will yield about Rs 2.33 lakh.

Do the Indians save more in the form of gold or in the form of deposits in banks ? The aggregate bank deposits amount Rs 89 lakh crores as per RBI. Using the same 5 member per household assumption, each household has a deposit of Rs 3.55 lakh. So clearly, Indians save more through bank deposits than in gold.

Though the newspapers make a lot of noise about fluctuations in stock markets, fluctuations in the price of gold, would have a much bigger impact in the mood of an Indian household. The recent drop in prices of gold would certainly have impacted the spending mood. A 5 % drop in the price of gold is equivalent to a drop in GDP of about 2 %. People would feel less wealthy and hence would consume less, perhaps.

The above estimates do not take into account the income inequality and differences in saving pattern between urban and rural households.

We often hear people talk about the hidden wealth of Indian households in the form of gold. We also hear about Indian society that is still quite primitive and saves in gold, rather than financial assets like bank deposits. The above numbers do not support this

  • G.Mohan 11th September 2015

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