India is the world's largest consumer of gold. It is also the world's fastest-growing mobile telephone market, adding as many as 15m users every month.
So little wonder then that the launch of a handmade 22-carat gold iPhone 3G by a UK luxury designer recently received the kind of publicity that some of the country's parliamentary candidates would dream of in the middle of their election campaigns.
Local buyers for the solid gold mobile phone will be few, given that it costs Rs1.7m ($34,000, Euro 26,000, Pound 23,000). But there are many other retailers trying to catch the eye of the Indian consumer with more affordable offers at a time of slackening economic growth.
Many are turning to the lower end of the market among India's 1.2bn population where they expect rural incomes to be recession-proofed with government support.
The Indian Post Office, with a network across the country, has started selling gold coins. The Tata group, better know for the launch of the world's cheapest car, has launched GoldPlus, a jewellery range aimed at the rural market. The company hopes 4,000 standardised designs will find buyers in small towns and the countryside, where 60 per cent of gold in India is purchased.
Last year was a bumper year for the metal in Asia's third largest economy. According to the World Gold Council, retail demand for gold by value rose 23 per cent in the calendar year to Rs880bn. The jewellery market represented the bulk of this; a third was investment products such as gold bars and coins.
Imports of gold bars alone almost doubled to $4bn in the year to the end of March, from $2.2bn in the previous year.
"The returns on gold have been exceptionally good," said Konal Doshi of Modern Impex, a Mumbai-based jewellery company. As investors, people believe "this offers the best opportunity in volatile times and as a hedge against inflation".
"There is now a fiscal stimulus. That money will come into the system. As well as the big cities, it will go to the countryside," he said.
"When you go to the smallest village you will find a goldsmith. This industry has been in this country forever. Gold demand is not just something from the last 20 or 30 years."
The gold jewellery export industry, however, is having a tougher time. Some exporters complain of confidence breaking down in trade with markets in the developed world.
Gold jewellery exports rose 11 per cent to $3.2bn in the six months to the end of March over the previous year. But the industry is reluctant to give forecasts for the uncertain months ahead.
Copyright: The Financial Times Limited 2009
