Indians Are Urged to Get Over Their Gold Bug

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.