India's gold obsession is increasing the wealth gap

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Dazzle or bust: a billboard model for a jewellery-shop advertises the buckling-under-gold bridal look aimed for by the status conscious, while the street market outside bustles with more humdrum wares, in Chennai, India. © Randy Olsen/National Geographic Image Collection/Alamy

Indians, it’s no great secret, have a particularly resistant strain of gold fever. It has been around for millennia. India has no goldmines but from the very dawn of long-distance trading, merchants fell hard for the golden allure, trading away pepper and spices, cloth and knowledge to get it. Kings and queens bought in. Many a violent war was fought over bounties of gold.

Today there is no important ritual in this country where the yellow metal is not required. At weddings, to celebrate the birth of children, or even at the end of life – gold plays a central role. Many festivals require the auspicious purchase of gold as a prayer for prosperity. Both film and folk songs describe India as ‘a golden bird’. The love of gold crosses every boundary: the rich, the poor, the privileged from every caste, class and religious persuasion, fall for its glitter.

On 9 April this year, a team of Indian surgeons operated on a 63-year-old patient with severe abdominal pain and recovered 12 bars of gold from his belly. He had risked his life to get this fortune into India and evade import duties. The metal bars ended up in state coffers and the patient found himself in jail.

This was neither an isolated case nor likely the last of its kind. India has recorded a spike in gold smuggling over the last two years – a re-run of the notorious trade of the 1980s. The current spike was prompted by the trebling of import duty in 2012-13 by the Indian government to 15 per cent in order to curb a rush of imports. This was part of a desperate attempt to rein in the country’s current account deficit (CAD) that had soared to a record high of $88 billion. The CAD is the difference between inflow and outflow of foreign currency and occurs when imports outstrip exports.

Gold imports declined marginally, but almost instantly there was an upsurge in smuggling. In April 2014, just before his government got booted from power, India’s former finance minister Palaniappan Chidambaram revealed that gold smuggling had hit 3,000 kilograms a month, worth a staggering $10 billion. The actual figure could be much higher. People – like our unlucky patient – deploy innovative methods to get the metal in. Sometimes dates are stuffed with it, the gold having being melted into the form of their pits. Or it is ground into granules and mixed with other metals to look like ore, or converted into gold belt buckles and flashlight batteries.

Golden nightmares

According to both the government and the country’s Reserve Bank, gold has become India’s biggest economic nightmare. Yet they remain paralysed when it comes to effective policy prescriptions to dampen down the voracious gold appetite. Today India is the world’s second-largest importer of gold after China. Nearly 20 per cent of global supply annually crosses the border, draining precious dollar reserves. The result is not only a big balance of payments problem but massive amounts of savings that are frozen out of the productive economy.

The import figures are mind-boggling: rising from 700 metric tons in 2010 to a whopping 975 in 2013, despite fiscal measures to curb the trade. Add to this the tons of gold Indian families have been hoarding down the ages. And that’s not the end of it. Gold exchange-traded funds on the country’s two stock exchanges continue to register a high turnover.

In the decade 2001-11, gold’s share of India’s total import bill jumped from 8.1 to 9.6 per cent, just behind oil products. According to a recent Indian Chamber of Commerce study – ‘India’s Gold Rush: Its Impact and Sustainability’ – the value of gold imports through the years of slowdown (2005-12) was higher than total expenditure on urban development, health, education, housing and family welfare taken together.

Put differently, the dollars sunk into gold could have helped educate, house and feed India’s massive population of poor people. Public policy remains ambivalent. On the one hand there are the fiscal curbs; on the other, India writes off roughly $9 to $11 billion annually on gold import duty concessions. Who benefits from these tax sops? And who loses?

The widening divide

Many economists say gold imports are one indicator of India’s growing inequality. The last few years have seen a dramatic contrast in the way two Indias – the urban and the rural – have used gold. One India buys the stuff by the ton in order to park its surplus kitty, while the other liquidates its small stash to raise cash and pay for farming costs and other exigencies of life. The rich India ruins the Current Account Deficit; the poor India in turn gets wrecked by it. Imports get dearer. The rupee devalues and dollar appreciates. The rich get richer while the poor slide further into poverty. But ultimately who’s feeding this gold frenzy?

The World Gold Council estimates 75 per cent of gold demand in India this past decade came from jewellery – purchased largely by the small percentage of Indians that make up the neo-rich. According to the Council, weddings generate half of the annual demand for gold. A large chunk of this goes into that persistent social evil: the dowry. Over the next decade, with more than half the population under 25, there are likely to be 15 million weddings in India each year. India’s appetite for gold simply defies market conditions: demand continues to grow despite a 400-per-cent rise in the rupee price in the last decade.

The dollars sunk into gold have helped educate, house and feed India's massive population.

The other major reason many Indians invest in gold is that a majority are still too poor to be even recognized by banks. Over half of the country’s 1.25 billion people have no accounts at all. This blocks them from formal avenues of finance or secure savings facilities. Many put their trust in gold for providing portability and long-term security. Or so they believe. The poor put their small savings in gold despite its price volatility. When in dire need, they are forced to liquidate this gold at well below market prices through local usurers or jewellers.

Take the case of Swapnil Shirke, a 24-year-old farmer from India’s crisis-hit cotton-growing belt of Vidarbha, who could not get out of the vicious debt cycle so many rural households get stuck in. The more he tilled, the deeper he sank into debt. On 23 November 2012, during a month of festivities throughout India, Swapnil had simply had enough. In desperation he raised a little money by selling his mother Ashabai’s 25-gram gold mangalsutra – a traditional gold chain worn by married women. With this he managed to pay the wages of his farm workers, keeping aside a part for his younger brother’s college fee. Then he hanged himself.

During that same festive November when Swapnil died, upwardly mobile Indians spent several million dollars on 50 tons of gold, mostly jewellery. The irony could not be starker. The gold chain Shirke sold was for his mother the last remaining memory of his late father. It was also the family’s last asset.

Jaideep Hardikar is a journalist based in Nagpur, Maharashtra, a 2009 Alfred Friendly Press fellow, and author of A village Awaits Doomsday.

Bomb drops on Indian countryside

Ratnamala Tekam, a widow with her two children in Mangi village, in the cotton producing belt of Vidarbha. Her husband killed himself in March 2009 amid mounting debts, hunger and crop losses.

Jaideep Hardikar

‘We have no right to dream.’

This is what a woman peasant in central India’s cotton-growing regions told me the day after her husband, a marginal peasant farmer, took his own life. His forlorn cotton fields had been wrecked by drought. She was the latest to enter widowhood; her husband the latest to join an ever-lengthening list of rural suicides. Between 1995 and 2010 more than a quarter of a million peasant farmers have taken their own lives in the Indian countryside.

The widow’s pessimism points to a striking contrast. Since 1995, rural Indians have became poorer, even as urban Indians have swelled in material prosperity. As the top 10 per cent grow in unprecedented affluence, the bottom 50 per cent are famished. There are now Fourth, Fifth and Sixth Worlds within the Third World.

As P Sainath, one of India’s frontline commentators, puts it: ‘Inequality is the fastest-growing sector of India.’

We have 24 billionaires with a combined worth of $335 billion – or a third of India’s gross domestic product. At least 836 million Indians live on less than 50 cents a day, according to a 2007 government report. More than 200 million of those get by on half that. Their world is one of perpetual recession.

The lives of so many millions of rural poor were wrecked so severely by economic ‘liberalization’ in the 1990s that the spate of suicides never got discussed at all. The vast majority of rural Indians were consigned to sub-human conditions. The meltdown of the world’s financial system has made little difference to them.

The Reserve Bank of India (RBI) – the central bank – did step in quickly and tightened the screws on the banking system, thanks to its former Governor, Yaga Venugopal Reddy. Today he is praised for the conservatism he was widely criticized for at the time, accused of blocking reform.

About 70 per cent of the Indian banking system is nationalized. Reddy’s contention was that markets are not always right. ‘Given that most Indians still live hand-to-mouth,’ he told the New York Times in 2009, ‘proposals to give freer rein to investors and banks to do as they see fit could backfire.’

The RBI actually did a lot to advance reforms, but resisted changes that would have made India more vulnerable to crises. It’s an irony that the government is today fast-tracking the so-called reforms, handing over publicly controlled resources to the private sector.

Vijiay Jawandhia, a leader of peasant farmers in the Gandhian district of Wardha in the state of Maharashtra, points out that India devalued its currency between 1991 and 2000 as it integrated its economy with global markets. Inflation rose. Organized sectors and civil servants were compensated with higher wages, but not rural Indians.

That was like dropping a bomb on the countryside. Everything, says Jawandhia, went up in that period – the cost of fuel, healthcare, education and producing food – except for the income of peasant farmers. City life has been subsidized, leaving the villages to feed urban affluence.

Is a skewed, high-growth model really better than a slow, sustained, more inclusive and ecologically healthy growth? The answer depends on which of the many worlds you inhabit.

Jaideep Hardikar is a journalist based in Nagpur, India.

Crops of truth

The first thing that catches the eye is their colour. Next, a fascinating variety.

As she neatly arranges beautiful clay pots filled with seeds, one by one, on the mud-littered floor of her house, Chandramma Molikeri’s face lights up. ‘These are our seeds – our life,’ says the sexagenarian, proudly unveiling different millets, some of which face extinction elsewhere in India.

The list is long: fox-tail millet, wild millet, small millet... All of that, she says, forms her family’s food, rich in nutrition, their health and wellbeing. Bishop-weed, she says, is good for lactating women; linseed good for the heart; little millet will protect you from the summer heat. In her native Telugu language, Chandramma calls them satyam pantulu or ‘crops of truth’.

That’s an ode to the resilience of seeds, which grow against several odds: the infertile, laterite-red or alluvial-black soils that characterize this region; fluctuating monsoons; climatic disruptions; market price volatility. The seeds are truthful. They grow without much water or inputs. They suit dry-land farming, in contrast with the high-cost, energy-intensive modern agriculture systems forced by the government on peasant farmers, millions of whom now languish under the yoke of debt.

Dry land and rain

We are in Bidakanne, a village of 2,000 mostly small farming households in Medak district in Andhra Pradesh state, 100 miles west of its capital, Hyderabad, southern India. It’s a dry-land area, like roughly 70 per cent of India’s agricultural land, where crops depend on rains to grow. Any small aberration in the monsoon has a disastrous effect. Now the clouds are pregnant with rain. A desperately awaited monsoon has finally announced its arrival after a gruelling summer and one of the worst drought years.

For people like Anjamma, life is celebration of colourful seeds. ‘I am respected for this knowledge...

Chandramma is not alone in her determination to bring back ‘dignity’ to crops that have been relegated to ‘inferior grains’. In all, some 5,000 women from 75 villages are staking a claim to create an ‘agro- biodiversity’ heritage site.

For more than two decades, with the help of the Deccan Development Society (DDS), they have been painstakingly preserving local seed varieties. It’s a revolution of sorts. Heritage status for those varieties on official seed registers could restrict any activity that might hamper this practice, says PV Satheesh, the founder and a director of DDS.

Its members are fighting market behemoths. The ‘knowledge initiative’ in agriculture, signed by Prime Minister Dr Manmohan Singh and US President George W Bush at Hyderabad in 2006, was cheered on by representatives from Wal-Mart and Monsanto. India now covets expensive technologies in agriculture, ostensibly to boost sagging farm growth. Many believe this strategy will do more harm than good.

Back to roots

The future, says Satheesh, lies in going back to the roots, to our native wisdom.

Chandramma radiates confidence in the wisdom she got from her parents, who inherited it from theirs, and they in turn from theirs. Listening to her is an education: on the science of the seeds she calls the ‘originators of life’; on the treasure of wisdom; on the human link to wild nature; on the secrets of biodiversity; on taste and the genesis of local cuisines that in India distinguish region from region.

‘If I have control over my seeds,’ she says, ‘I control my food and my family’s nutrition.’ Preserve your own seeds; grow nothing you can’t eat. ‘Without seeds,’ she says, ‘a farm is like a house without light.’

The farmers of this region grow between 6 and 25 crops from up to 80 seed varieties. This rich diversity, they say, is an insurance against aberrations of nature or market fluctuations. Some seeds survive untimely rain, others resist drought. They never fail.

The 5,000 DDS women are confederated through village-level sanghams or voluntary groups. They represent the poorest of the poor of the peasant world and are from Dalit – erstwhile ‘untouchable’ – communities at the bottom of the Indian social scale. Sammamma, another seed-keeper, says their lands, like them, are resource-poor – a sign of discrimination. Seeds are a rallying point, a reason for the women farmers to confederate and ultimately to have a political voice.

Apart from their individual seed collections, these women manage some 60 community seed banks with over 80 retrieved land races (wild varieties) that have been obliterated by modern agricultural practices – vibrant reminders of what once dotted India’s agricultural panorama. In all the 75 villages you’ll find seeds tied across the doors in garlands – thoranam – a sign of how proud farmers are of their biodiversity.

The contraption they use to store seeds is uncomplicated. A handmade bamboo basket, 60 centimetres round, 45 deep, is plastered with cow dung. Once the basket is dry, the seeds are placed in it, covered with grass and capped with cow dung. The seeds stay well protected. It costs nothing.

On the day of sowing, Chandramma says, she and other sangham members worship the basket of seeds at five different places on the field before opening it.

Festival

Deccan, as this region is known, has festivals of which seeds are the soul. Endlagatte Punnam is one such. The festival precedes the harvesting of winter crops. Peasant farmers collect ear-heads of crops from their farms and, with home-cooked sweets, offer them to the village goddess.

A ritual that coincides with the Hindu festival Dussehra is here called Gatlu Koorchovadam. Women farmers mix the five most important seeds of winter crops with soil from a single plot. They fill clay pots with the mix and decorate them with sugarcane and sorghum. When the seeds sprout, they visit each others’ houses to see which have greater potency, then take the best to the farm for planting.

The selling or trading of seeds is a strict no-no. They are only to be shared, borrowed or exchanged. Chandramma says she lends her seeds to villagers, provided they return double the quantity after harvest. Both resources and knowledge are freely exchanged, encouraging localized systems of seed adaptation.

PV Satheesh is a driving force behind the Millet Network of India (MINI), which is trying to revive India’s coarse staples. When he first came here, he says, the process of ecological destruction had set in; fallow lands were becoming more extensive as agriculture became more intensive, with subsidized industrial monocultures destroying small farms. Fallow lands and malnutrition went hand in hand. By 1997 seed diversity was down by 70 per cent. It was time for some serious introspection.

Marginalization of crops led to marginalization of land and, ultimately, of peasant farmers, Satheesh says: ‘At the core, it stemmed from the loss of seed biodiversity and sovereignty.’ It took time for the DDS to create trust and convince farmers to return to coarse grains they had stopped growing. ‘Now they are convincing others to fall back upon their traditional wisdom.’

Fighting the behemoths

Across India, multinational corporations are rapidly taking over the multi-billion-dollar seed market, adding to the ruin of millions of peasant farmers. Monsanto-controlled genetically modified (GM) seeds are the latest threat to the rich agro-biodiversity of India, many peasant lobbies say. Peasant farmers’ suicides have been attributed to their introduction. Farmers also fear that GM technologies could lead to serious soil erosion. Diversified farming practices are more stable and sustainable, and minimize financial risks – an important factor for small farmers.

No wonder that resistance to commercial seed companies is growing. It ranges from NGOs like the DDS and movements such as the Beej Bachao Andolan (Movement to Save Seeds) in the foothills of the Himalayas, to the widely known Navdanya with its network of partners, to little-known individual peasant-farmers like Dadaji Khobragade who, on his half-hectare farm in a village in Maharashtra, is preserving and creating new rice varieties.

For people like Anjamma, life is celebration of colourful seeds. ‘I am respected for this knowledge,’ she says. ‘When all other commercial crops failed last year due to drought, I got bumper crops.’

On her four hectares of land, which she bought piece by piece for 20 years, she grows about 80 different crops. She says new generations are willingly embracing age-old wisdom. Wisdom, she says, is never obsolete. It is eternal. ‘Search my kitchen, you can’t find one crop that I don’t grow,’ she says. ‘If you can tell me one crop that I do not grow,’ she chuckles with a twinkle, ‘I will do whatever you say.’

Jaideep Hardikar is a journalist based in Nagpur, India. In 2009 he was an Alfred Friendly Press fellow.