Betting on Gold and Global Dominance: How India’s Boom Could Dethrone China

[GoldCore]

Buckle up, because India isn’t just racing on the path of economic transformation; it’s blazing a trail. We’re talking about a nation that has evolved from contributing just 6.3% of global GDP growth in 2007 to a projected 17.4% by 2028. The underdog is gaining ground on China, and gold investors might be the unexpected beneficiaries.

The Shift in the Economic Landscape

In Q1 2023, India’s GDP growth stood at an impressive 6.1%, leaving China’s 4.5% in the rearview mirror. If you think this is mere fluke, you’re missing the larger tapestry of a world reshaped by dynamic trade, open markets, and crucially, domestic reforms.

People Power

Consider this: India is now the world’s most populous country, overtaking China in April this year with a population of 1.4 billion. By 2027, India is expected to add 75 million more citizens, while China will lose 8 million. China’s ageing, plateauing middle class lacks the fuel for significant economic expansion. In contrast, India’s youthful, underemployed population is a powder keg waiting to explode—in a good way.

The Pitfalls of Central Control

China’s love affair with central planning doesn’t just come with a bouquet of red roses; it has its thorns. High-profile tech billionaires go missing only to resurface “humbled.” This iron grip stifles creativity and injects tension into international relations. On the flip side, India—boasting a global diaspora helming companies like Alphabet, Microsoft, and Adobe—capitalises on its reputation for entrepreneurial freedom. Apple’s choice to manufacture the iPhone 14 in India instead of China is a glaring example.

 

The Achilles Heel

But let’s not get carried away. India has hurdles to clear. Despite its enormous promise, the nation has a history of failing to capitalise on its economic potential. Although Indian PM Modi has ushered in crucial infrastructure and modernization programs, the ghosts of bureaucratic and social challenges still haunt India’s progress.

The Numbers Game

To put things into perspective, China’s GDP sits at a hefty $17.7 trillion compared to India’s $3.2 trillion. China outpaces India in STEM graduates, R&D investment, and literacy rates. But remember, China was once an underdog too. In the ’80s, its economy was smaller than India’s. If China can leapfrog its way to economic primacy, why can’t India?

Gold: The X-Factor

And here’s where gold comes in. In India, gold isn’t just a metal; it’s part of the national psyche. Indians are increasingly moving from rural to urban settings, changing the form in which they invest in gold—from jewellery to bars and coins. As India’s economy expands, so will its appetite for gold, making it a market impossible to ignore for global investors.

The Long Road Ahead

India might be where China was in the early 2000s. The recipe for success includes enhancing educational systems, modernising infrastructure, and steering focus towards cutting-edge sectors like AI. The nation needs to decide if it’s content with mere participation or becoming a serious player. .

As India fine-tunes its focus, the world watches. Recently India has focussed on getting a spaceship on the moon, which is an incredible achievement, but at the same time investment in AI is falling far behind the level one would expect of an emerging superpower.

This may be telling as to where their priorities lie; playing to stay in the game or playing to a domestic audience. There can be no doubt that their future is in their hands and if fully embraced all the world will benefit from their success, even the Chinese.

[Bratnia]

Much of gold in India is down to lack of access to rural banking. Pay day loans are more typically lending some gold for cash, and on pay day paying back the cash and some interest to have their gold returned, and the ease of access to such lenders, in contrast to the nearest bank being too far out of reach. Convenient and easy for both parties. There's also the distrust in paper currency due to past defaults. As more transition from rural to urban however and gold could see declines in preference to that of alternative assets/banking.

IIRC the typical loan for gold is for up to 75% of the spot price of gold, and interest runs at a monthly rate equivalent to around 8%/year. So the lender gets a nice gold dividend, or if the borrow defaults they got gold added to their portfolio at a 25% below spot price. There's also little in the way of form filling and loan interviews etc. Increased urbanisation IMO will be inclined to see increases in credit cards availability/usage rather than increased demand for gold.