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The household investor has been blamed for upsetting the macro-economic balance due to their gold buying spree in the past two years. RBI annual report throws some interesting fact that given a basket of investment avenues, the household has made smart savings decision from time to time. Surprisingly enough, the household financial savings rose from R6.75 trillion (7.5% of GDP) in FY12 to R7.74 trillion (7.7% of GDP) in FY13 as inflation ebbed and as gold lost its tag of being a natural hedge. The demand for gold has contracted—volume of imports fell from over 1,000 tonne in FY11 to less than 850 tonne last year—as government raised customs duty from 2% in January 2012 to 6% in January 2013. The duties were further raised to 8% in June and 10% this month apart from various restrictions on gold imports and sale of coins and bars by banks. What actually dissuaded household investors to shy away from gold may be a sharp fall in inflation from 9.6% in FY11 to 7.4% in FY13.
What's important, household investment in mutual funds, shares and debentures rose to R344 billion in FY13 from a withdrawal of R45 billion in FY12. The risk averse household also increased its investment in provident and pension funds to R1.6 trillion in FY13 from R1.36 trillion in FY12. This shift in investment by the household investors will help in reining in the CAD, provide more investible funds for industrial expansion and lift economic growth.