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Yesterday, the New Delhi Reserve Bank revealed that it had bought 200 tons of gold in exchange for dollars. The sale came from the IMF's reserves.
But that's not all. In unusually provocative language, Pranab Mukerjee, India's finance minister said that, "Europe collapsed and North America collapsed." Other statements included "We have money to buy gold. We have enough foreign reserves."
Unlike the other BRIC economies, India is not reliant on export driven sales of raw material commodities and/or cheap manufactured goods. So, there has been no traditional dollar peg that has driven its trade relationship w/the outside world. Under the current and past administrations, India has been slowly but steadily shedding its Nehru era Socialist ties when the country was still politically and economically tied to Soviet Russia.
Since the end of the Cold War, subsequent administrations have embarked on an economic liberalization program and met stunning success - most notably in the business processing outsourcing (BPO) sectors which includes IT work. But much of the country remains predominantly agrarian in nature. Other stumbling blocs include the powerful presence of trade unions in the southern provinces and long running Communist insurgenices in the north-east. Then there are the recurrent security problems with Kashmir and Pakistan to the north-west.
The price of spot and forward gold rose in the markets to hit a yearly high of $1087/troy ounce.
http://timesofindia.indiatimes.com/biz/international-business/IMF-sells-200-tonnes-of-gold-to-India-worth-67-billion/articleshow/5191262.cms
http://www.ft.com/cms/s/0/0eaa4a80-c856-11de-a69e-00144feabdc0.html
