Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Country Liechtenstein Qatar Luxembourg Bermuda Monaco Singapore Jersey Falkland Islands (Islas Malvinas) Norway Brunei Hong Kong United States United Arab Emirates Guernsey Switzerland Cayman Islands Gibraltar Netherlands Austria Kuwait

GDP - per capita (PPP) (US$) 141,100 104,300 81,100 69,900 63,400 60,500 57,000 55,400 54,200 50,000 49,800 49,000 48,800 44,600 43,900 43,800 43,000 42,700 42,400 42,200

As on January 1, 2012

India 3876

By Arvind Subramanian For the past three decades, the Indian economy has grown impressively, at an average annual rate of 6.4 per cent. From 2002 to 2011, when the average rate was 7.7 per cent, India seemed to be closing in on China - unstoppable, and engaged in a second "tryst with destiny," to borrow

Jawaharlal Nehru's phrase. The economic potential of its vast population, expected to be the world's largest by the middle of the next decade, appeared to be unleashed as India jettisoned the stifling central planning and economic controls bequeathed it by Nehru and the nation's other socialist founders.

But India's self-confidence has been shaken. Growth has slowed to 4.4 per cent a year; the rupee is in free fall, resulting in higher prices for imported goods; and the specter of a potential crisis, brought on by rising inflation and crippling budget deficits, looms. To some extent, India has been just another victim of the ebb and flow of global finance, which it embraced too enthusiastically. The threat (or promise) of tighter monetary policies at the Federal Reserve and a resurgent American economy threaten to suck capital, and economic dynamism, out of many emerging market economies. But India's problems have deep and stubborn origins of the country's own making. The current government, which took office in 2004, has made two fundamental errors. First, it assumed that growth was on autopilot and failed to address serious structural problems. Second, flush with revenues, it began major redistribution programs, neglecting their consequences: higher fiscal and trade deficits. Structural problems were inherent in India's unusual model of economic development, which relied on a limited pool of skilled labour rather than an abundant supply of cheap, unskilled, semi-literate labour. This meant that India specialized in call centers, writing software for European companies and providing back-office services for American health insurers and law firms and the like, rather than in a manufacturing model. Other economies that have developed successfully - Taiwan, Singapore, South Korea and China - relied in their early years on manufacturing, which provided more jobs for the poor. Two decades of double-digit growth in pay for skilled labour have caused wages to rise and have chipped away at India's competitive advantage. Countries like the Philippines have emerged as attractive alternatives for outsourcing. India's higher-education system is not generating enough talent to meet the demand for higher skills. Worst of all, India is failing to make full use of the estimated one million low-skilled workers who enter the job market every month. Manufacturing requires transparent rules and reliable infrastructure. India is deficient in both. High-profile scandals over the allocation of mobile broadband spectrum, coal and land have undermined confidence in the government. If land cannot be easily acquired and coal supplies easily guaranteed, the private sector will shy away from investing in the power grid. Irregular electricity holds back investments in factories. India's panoply of regulations, including inflexible labour laws, discourages companies from expanding. As they grow, large Indian businesses prefer to substitute machines for unskilled labour. During China's three-decade boom (1978-2010), manufacturing accounted for about 34 per cent of China's economy. In India, this number peaked at 17 per cent in 1995 and is now around 14 per cent.

In fairness, poverty has sharply declined over the last three decades, to about 20 per cent from around 50 per cent. But since the greatest beneficiaries were the highly skilled and talented, the Indian public has demanded that growth be more inclusive. Democratic and competitive politics have compelled politicians to address this challenge, and revenues from buoyant growth provided the means to do so. Thus, India provided guarantees of rural employment and kept up subsidies to the poor for food, power, fuel and fertilizer. The subsidies consume as much as 2.7 per cent of gross domestic product, but corruption and inefficient administration have meant that the most needy often don't reap the benefits. Meanwhile, rural subsidies have pushed up wages, contributing to double-digit inflation. India's fiscal deficit amounts to about 9 per cent of gross domestic product (compared with structural deficits of around 2.5 per cent in the United States and 1.9 per cent in the European Union). To hedge against inflation and general uncertainty, consumers have furiously acquired gold, rendering the country reliant on foreign capital to finance its trade deficit.

At a news conference last week, India's harassed finance minister, P. Chidambaram, addressed the issue of the rising current account deficit and the fall of the rupee against the dollar. His message to his countrymen: Please stop buying so much gold. Chidambaram has a point. India is the world's biggest consumer of gold, accounting for a little more than one-third of world demand. Traditionally, gold in India has served a double purpose of consumption (it's often the single biggest expense at a wedding) and investment, because it is seen as a more reliable hedge against inflation than savings in financial instruments. Urban and rural Indians differ in their habits in many other spheres, but they are united in their trust in gold. A recent

report showed that gold accounted for as much as 10 percent of total household savings in 2011.

Enlarge image Gold necklaces sit in a window display at a Dhanraj Jewelers store in Mumbai. India this month increased a tax on gold imports as it tries to curb demand for the metal thats contributed to the current -account gap and hurt the currency. Photographer: Dhiraj Singh/Bloomberg

Unfortunately, almost no gold is produced domestically, and so rising demand for the precious commodity severely affects the balance of payments. Gold is now the second-largest expense on India's import bill, after crude oil. One would have thought that rising gold prices -- a jump of more 500 percent since 2000 -- would have had the effect of curbing demand, but that's not been the case. As this graph shows, India's demand for gold remained between 550 and 800 metric tons annually from 1997 to 2009, even as prices kept going up. Here's a market, then, that appears to be price inelastic -- but apparently only when prices are rising. When prices fell to a two-year low in April, gold demand shot up to record levels, with monthly imports averaging 152 tons in the first two months of the new fiscal year, more than twice the monthly average of 70 tons from the previous year. To suppress demand, the government has already raised the import duty on gold twice this year, from 4 percent to 6 percent in January and then from 6 percent to 8 percent in June. Last week, Chidambaram delivered a small homily on gold that was part economics lesson, part supplication: On gold, I am happy that all my appeals are being heeded partly by the people of India.... Net gold imports averaged 135 million dollars a day in the first 13 business days of May.... However, in the subsequent 14 business days, it averaged only 36 million dollars. So gold imports have sharply come down, but I would be happy if they come down even further. I continue to hope and dream. Suppose we stop gold imports ... suppose the people of India don't demand gold and we don't have to import gold for one year ... the whole situation will so dramatically change. People who want to buy gold must realize that every ounce of gold is imported -every ounce. No gold is manufactured in India. You pay rupees, we have to provide the dollars. You think you are buying gold in rupees but actually you are buying gold in dollars. I would once again appeal to everyone: please resist the temptation to

buy gold. If we can have it for six months, one year ... it will dramatically change the situation of the current account deficit, and you will see its positive impact on every other index that measures the economy: stock market, exchange rate, interest rates. Chidambaram is right, as this graph calculating India's trade deficits with and without gold demonstrates. He is by no means the first finance minister to try and persuade his countrymen not to park their money into gold. Last year, his predecessor Pranab Mukherjee, was quoted as saying that the: Quantum of import of gold ... is a clear indication (that) large section of community ... want investment in dead asset only with expectation that value would appreciate.... Time is ripe to motivate our educated upper middle class to climb from saving mode to wealth generation mode. This is, however, a long-term project. India's gold-buying culture is deeply entrenched. As Leif Eskesen, chief economist for India and Southeast Asia at HSBC Holdings Plc, wrote in his report "India Perspectives: The Love Affair With Gold" published earlier this year: Gold imports have always been high in India, which has left Indian households collectively holding no less than 20,000 tonnes of gold, according to the World Gold Council. At current prices that works out to USD4,500 worth of gold per household. Arguing that investing in gold was for many Indians a perfectly logical decision, Monika Halanwrote in the business newspaper Mint: I hold the view that the Indian household makes a sensible decision to hoard gold. It is sensible because access to financial assets remains difficult and where access is easy, the regulatory failure to stop large-scale cheating of retail investors ... has broken the fledgling faith in markets for the average investor. Regulatory and institutional failure is the reason people hoard gold and not because they are stupid. And as the country looks more and more unstable, we buy more and more gold perfectly logical and rational. This is no different than industrialists moving their business overseas and the rich buying real estate and stock abroad. As the late Indian economist IG Patel, who wrote extensively in the 1950s on India's gold obsession and ways in which to mobilize the hoarded wealth, once said: In prosperity as in the hour of need, the thoughts of most Indians turn to gold. The evidence from the last few years suggests that when steeply rising prices, and a debilitating current account deficit that raises the cost of other goods, come up against a powerfully entrenched cultural reflex, it's not always the laws of economics that win out.

(Chandrahas Choudhury, a novelist, is the New Delhi correspondent for World View. Follow him on Twitter. The opinions expressed are his own.)

Why do Indians buy gold?

Submitted by Misha Sharma

India is one of the biggest markets for gold and gold loans. Reasons for this are spread across various social, economic and cultural dimensions. According to World Gold Council, India accounts for 10% of total world gold stock, of which rural India accounts for 65% of the total gold stock. For Indians, gold is not just a commodity, but an auspicious metal that they buy for various purposes on different occasions. There has always been a high demand for gold in India, irrespective of prices. During 2001- 2012, the annual demand for gold remained relatively stable at around 700 to 900 tonnes despite constant rise in prices during the last ten years[1]. In a recently concluded CMF research project, we attempt to understand the characteristics and behaviors of the various stakeholders involved in the gold loan market through a survey methodology. This post highlights one of the interesting findings from our preliminary analysis of the data. In order to gauge peoples perception about gold, we asked respondents their motive behind buying gold. Following figure provides a snapshot of the various reasons people cite for buying gold.

As observed, 31% of respondents buy gold for use during emergency situations. This is because gold loans are easily available with minimal procedural requirements. Gold is also considered as one of the most liquid assets, since it can be easily converted back to cash and hence the resale value of gold is quite high compared to other types of asset. The second most common reason for buying gold is that gold has a very high traditional value in India. This includes buying gold during festivals, marriages, etc. There are various festivals in India during which buying gold is considered auspicious. This is true especially in the case of South India where people are gripped with what we can call a gold mania. 20% of respondents save in the form of gold. This is indeed a prudent decision as the value of gold has seen an upward trend over the last few years. Therefore, Indians prefer investing and saving in the form of gold, as gold is considered to be a safe asset. Lastly, a total of 19% of the sample size cites buying gold for marriage purposes. To give you further insight on this, following is an observation from one of our field visit while administering the gold questionnaire:

Surveyor: Do you often buy gold? Respondent: No Surveyor: Any specific reason, why you dont show much interest in buying gold? Respondent: I have two boy children and so I dont care! If I had a girl child, I would start accumulating gold from the minute she was born. Guess I am lucky.

The above anecdote reflects societys attitude towards importance of gold in marriages. Low income households face extreme societal pressure to buy gold in spite of their economic barriers. Whether Indians are emotionally attached to accumulating/buying gold is an interesting question to investigate. Historically, Indians have expressed great emotional attachment to their gold, which is one of the primary reasons for a flourishing Indian gold-loan market. However off late, the industry has witnessed increasing defaults on gold loans, due to decrease in prices of gold. This reflects peoples changing perception about gold. Indians have proved to be smart investors and consider gold as a medium to save, invest, hedge against inflation and most importantly to safeguard their future. Therefore, in spite of Finance Minister Chidambarams constant plea to contain uncontrolled passion for gold the demand for gold in India is sky high.

Golden facts about

GOLD

Numbers and facts

Some of the more extraordinary statistics which gold has accumulated across the centuries and around the world.

The atomic number of gold, which means there are 79 protons in the nucleus of every atom of gold.

The 40,000 miners who joined the California Gold Rush in 1849 were called 49ers. Only a very few ever got rich.

One ounce of gold can be stretched to a length of 50 miles; the resulting wire would be just five microns wide.

Million - the number of times that all of the existing gold in the world, turned into 5 micron wire, could wrap around the planet.

One ounce of pure gold could be hammered into a single sheet nine metres square.

 Gold melts at 1064 degrees centigrade.

...And only boils at 2808 degrees centigrade.

This is the total number of tonnes of gold mined since the beginning of civilisation.

... all of which would fit into a crate of 21 metres cubed.

Over 90 percent of the worlds gold has been mined since the California Gold Rush.

million people worldwide depend on gold mining for their livelihood.

 The number of grams in a troy ounce of gold.

The number of troy ounces in a London Good Delivery Bar.

Julius Caesar gave two hundred gold coins to each of his soldiers from the spoils of war in defeating Gaul.

Fort Knox holds 4,600 tonnes of gold.

And the US Federal Reserve holds 6,200.

The temperature of the human body is 37 degrees centigrade. Because of golds unique conductivity, gold jewellery rapidly matches your bodys heat, becoming part of you.

It is rarer to find a one ounce nugget of gold than a five carat diamond.

The percentage of gold mined today that becomes jewellery.

The % increase in the price of gold from Dec 2000 to March 2013.

The number of parts per thousand of pure gold in 18 carat gold.

In 95 BC, Chinese Emperor Hsiao Wu I minted gold commemorative piece to celebrate the sighting of a unicorn.

 The largest gold coin ever minted, a 2007 Canadian $1,000,000 Maple Leaf is 53cm in diameter.

Howard Carter made his famous tiny breach of the top left hand corner of the doorway to reve al the first glimpse of Tutankhamuns tomb on 26 November 1922.

Even at only 10 parts of gold per quadrillion, the worlds oceans are estimated to hold up to 15,000 tonnes of gold.

The largest ever true gold nugget weighted 2316 troy ounces when found at Moliagul in Australia in 1869. It was called the Welcome Stranger.

In March 2013, the SPDR Gold Shares (GLD) fund, a World Gold Council sponsored exchange traded fund, held around US$63 billion assets under management.'

Heritage
Despite its unrivalled properties, gold is an inert material. It does nothing until man discovers it, mines and refines it and bends it to his will. So the history of gold is very much the history of civilisation. Here are some points in time where that history was made. Click on the images to enlarge

c. 3600 BC
First smelting of gold
Egyptian goldsmiths carry out the first melting or fusing of ores in order to separate the metals inside. They use blowpipes made from fire-resistant clay to heat the smelting furnace.

2600 BC
Early gold jewellery
Goldsmiths of ancient Mesopotamia (modern-day Iraq) craft one of the earliest pieces of gold jewellery, a burial headdress of lapis and carnelian beads with willow leaf-shaped gold pendants.
Image Trustees of The British Museum

1200-1500 BC
Advances in jewellery making
Artisans develop the lost-wax jewellery casting technique. The process allows for improved hardness and colour variation which in turn broadens the market for gold products.

1223 BC
Creation of Tutankhamun's funeral mask
Instantly recognised the world over, the funeral mask of Tutankhamun is a triumph of gold craftsmanship from the ancient world.

950 BC
Solomon builds gold temple
The Queen of Sheba from Yemen presents King Solomon of Israel with 2,500 kilos of gold, bringing the contents of his treasury to 5,700 kilos. Solomon uses part of his holdings to construct his famed temple, allegedly overlaid with gold.
Nir Levy

600 BC
First gold dentistry practiced
The first use of gold in dentistry as the Etruscans begin securing substitute teeth with gold wire. Biocompatibility, malleability and corrosion resistance still make gold valuable in dental applications.

564 BC
First international gold currency created
King Croesus develops improved gold refining techniques, permitting him to mint the world's first standardised gold currency. Their uniform gold content allows 'Croesids' to become universally recognised and traded with confidence.

300
First gold nanoparticles
The Romans use gold to colour the Lycurgus Cup. Melting gold powder into glass diffuses gold nanoparticles throughout which then refract light, giving the glass a luminous red glow.
Image Trustees of The British Museum

1300
Hallmarking practice established
The world's first hallmarking system, scrutinising and guaranteeing the quality of precious metal, is established at Goldsmith's Hall in London - where London's Assay Office is still located today.
Image The Assay office, Birmingham

1370
The Great Bullion Famine begins
During the years 1370-1420, various major mines around Europe become completely exhausted. Mining and production of gold declines sharply throughout the region in a period known as 'The Great Bullion Famine'.

1422
Venice's record year
The Venice Mint strikes a record 1.2 million gold ducats using 4.26 metric tonnes of gold from Africa and Central Asia. These small coins prove popular as they are easy to mint and carry plenty of value.
Image Classical Numismatic Group, Inc., CC-BY-SA-2.5, Wikimedia Commons

1511
Ferdinand unleashes invasion force
King Ferdinand of Spain proclaims "Get gold, humanely if you can, but at all hazards, get gold!", launching unprecedented expeditions to the Americas. Within years, the Inca and Aztec civilisations would be virtually destroyed by Spanish conquerors.

1717
UK gold standard commences
Britain moves onto a de facto pure gold standard, as the government links the currency to gold at a fixed rate (establishing a mint price of 77 shillings, ten and a half pennies per ounce of gold).

1803
First gold electroplating practiced
The first recorded experiment in electroplating is carried out by Professor Luigi Brugnatelli at the University of Pavia. Gold electroplating ensures improved conductivity, now essential to many 21st century technologies.
Image Deep Blue, CC-BY-SA-3.0, Wikimedia Commons

1848
California Gold Rush begins
John Marshall discovers gold flakes while building a sawmill near Sacramento, California. The greatest gold rush of all time follows as 40,000 diggers flock to California from around the World.

1885
South African Gold Rush begins
While digging up stones to build a house, Australian miner George Harrison finds gold ore on Langlaagte farm near Johannesburg. Miners flock to the region. South Africa will go on to become the source of 40% of the world's gold.
Image Terry Davis

1885
First Faberge Easter egg crafted
Carl Faberge makes his first gold Imperial Easter Egg for Tsar Alexander III. Named The Hen Egg, it was commissioned as a gift from the Tsar to his wife, the Empress Maria Fedorovna, beginning a tradition that lasts until 1917.
Image PetarM, CC-BY-SA-3.0, Wikimedia Commons,

1870-1900
Adoption of gold standard
All major countries other than China switch to the gold standard, linking their currencies to gold. The practice of bimetallism is abandoned.

1925
Gold standard returns
The UK returns to the gold standard at pre-war parity of $4.86=1 with sterling convertible to gold at 77sh 10.5d per standard ounce. This follows the country's departure from the gold standard six years previously at the outbreak of World War I.

1933
Roosevelt suspends gold
President Roosevelt suspends US dollar convertibility to gold (gold at US$20.67/oz). The export of all transactions in, and the holding of gold by private individuals, is forbidden. Presidential proclamation makes the dollar convertible again in January 1934 at a new price of $35 per troy ounce.

1939
World War II closes gold market
The London gold market is closed on the outbreak of war, as at the beginning of World War II. The world will later return to a fixed system of exchange rates, this time with currencies fixed to the dollar and the dollar convertible into gold.

1944
Bretton Woods conference
The Bretton Woods conference sets the basis of the post-war monetary system. The US dollar is set to maintain a $35=1 oz gold conversion rate. Other currencies are fixed in terms of US dollar, thus forming a Gold Exchange Standard.

1961
First gold bonded microchips
Gold bonding wire is used in microchips engineered at Bell Labs in the US. Nowadays literally billions of chips are bonded this way every year, controlling all manner of indispensible electrical devices.

1961
First gold in space
The first manned space flight uses gold to protect sensitive instruments from radiation. In 1980, 41kgs of gold is included in space shuttle construction through brazing alloys, fuel cell fabrication and electrical contacts.

1967
First South African Krugerrand
The Krugerrand is introduced in 1967, as a vehicle for private ownership of gold. This iconic coin is actually intended for circulation as currency.

1971
Gold window closed
The Bretton Woods system of fixed exchange rates comes to an end as President Nixon "closes the gold window", suspending US dollar convertibility to gold. The world enters its present day system of floating exchange rates.

1985
First gold-based arthritis treatment
Pharmaceutical giant, SmithKline & French, develops Auranofin, a gold-based drug for the treatment of rheumatoid arthritis. The drug receives regulatory approval and goes on sale for the first time.

1999
First Central Bank Gold Agreement
The First Central Bank Gold Agreement (CBGA) is agreed. 15 European central banks declare that gold will remain an important element of their reserves and collectively cap gold sales at 400 tonnes per year over next five years.

2001
First gold used in heart surgery
Boston Scientific markets the first gold-plated stent (Niroyal) used in heart surgery. Inserted inside large arteries and veins, such stents act like scaffolding, propping open the blood vessels to allow adequate flow.
Image Richard Lee

2003
K-gold launched in China
The World Gold Council creates an entirely new market segment with the launch of K-gold, the first 18k jewellery in China. The jewellery, in predominantly white and yellow gold, takes its inspiration from Italian design.

2004
Launch of SPDR Gold Shares
The market is transformed by an innovative, secure and easy way to access the gold market. Six years later SPDR exceeds $55bn in assets under management.

2009
Central banks return to buying
In the second quarter of the year, central banks collectively become net purchasers of gold for the first time in two decades. This reflects a combination of slowing sales from European banks and growing purchases by emerging market countries.
Image National Geographic

2010
Gold price sustains record highs
Fiat currencies are undermined by inflation fears and successive financial crises. The London pm fix achieves 35 separate successive highs in the year to date.

2011
Gold in catalytic converters
Gold used in catalytic convertors by a leading European diesel car manufacturer. The first use of gold in automotive emissions control.

2012
Olympic Gold
The custom of awarding gold, silver, and bronze in sequence for the first three places dates back to the 1904 Summer Olympics in St. Louis, Missouri in the United States. At the 2012 games, the International Olympic Committee stipulates that each gold medal must have a minimum of at least six grams of gold. The London 2012 gold medals are the biggest and heaviest summer Olympic medals ever made.Read more...

Demand and supply

Gold is rare. At the end of 2012, there were 174,100 metric tonnes of stocks in existence above ground. If every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure 20 metres in any direction. The demand for this precious and finite natural commodity occurs in many geographies and sectors. Around 60% of todays gold becomes jewellery, where India and China, with their expanding economic power, are at the forefront of consumption. In East Asia, India and the Middle East, gold has powerful cultural meaning, accounting for approximately 70% of the worlds gold jewellery in 2012. But jewellery creates just one source of demand; investment, central bank reserves and the technology sector are all significant. Each is driven by different dynamics, adding to golds strength and independence. In creating supply, gold mining companies operate on every continent of the globe. This broad geographical dispersal means that issues, political or otherwise, in any single region are unlikely to impact the supply of gold. Beyond mine production, recycling accounts for around a third of all current supply. In addition, central banks can also contribute to supply should they sell part of their gold reserves. It is worth noting that after 20 years as net sellers, central banks are now net buyers, causing not only a significant decrease in supply but a corresponding, simultaneous increase in demand.

The golden constant

Since the 14th Century, golds purchasing power has maintained a broadly constant level. To put this in practical terms, an ounce of gold has repeatedly bought a mid-range outfit of clothing. This was true in the fourteenth century, when an ounce of gold was worth 1.25 to 1.33; it was true in the late 18th century and it remained true at the beginning of this century (2000 to 2008), when an ounce of gold averaged 269 or $472. Even the exchange rate between gold and commodities has been relatively constant over the centuries. On the other hand, the US dollar that bought 14.5 loaves of bread in 1900 buys only 3/4 of a loaf today. While inflation and other forces have ravaged the value of the worlds currencies, gold has emerged with its capacity for wealth preservation firmly intact. Being no-ones liability, gold exhibits the same wealth preserving qualities in the face of financial turmoil, earning a reputation as a crisis hedge in addition to its credentials as an inflation hedge. The Golden Constant: The English and American Experience 1560-2007 by Roy W Jastram with updated material by Jill Leyland. Published 2009 by Edward Elgar Publishing Ltd (www.e-elgar.com), hardback, 368 pages, ISBN: 978 1 84720 261 1.

Price

In todays market, trading in several exchanges of both physical gold and gold derivatives determines the daily gold price, with the traditional London gold price fix still serving as the daily benchmark price. This fix is set twice daily at 10am and 3pm. The price of gold is usually measured in US dollars per troy ounce.