Why India needs a new gold standard

Treating household ownership of gold as consumption skews inflation, current account balances and per capita wealth numbers

- Monika Halan

Gold stands apart simply because of the collective memory of it being an asset that has survived the pressures of time.

(HT ARCHIV)

Is gold a consumable item or is it an asset? The question looks silly - of course, it is an asset.

It has been a store of value over millennia and, in contemporary times, central banks own it as a part of their reserves. But policymakers and economists have treated individually-held gold as a consumable and excluded it from the asset list owned by households in many important numbers. Yet, the Indian household's ownership of gold has made global headlines over the years. India needs to rethink the way it accounts for gold in its national statistics and put pressure on global inequality lists to take note of the role of gold as an asset for the Indian household.

Gold, in itself, has no value. A stock or a bond, for example, has an underlying business that is an asset or a loan that generates an income. There is a price for gold because there is demand. The same can be said for many metals, and now crypto-coins, that have no use by themselves but have a price because there is a demand. Gold stands apart simply because of the collective memory of it being an asset that has survived the pressures of time and has remained a store of value - something that does not lose value over the long sweep of history.