India's continued rapid growth which will have significant impact on income and savings, will increase gold purchasing by almost 3% per annum over the next decade. In gold terms, India is a market with significant scale. In 2010, total annual consumer demand reached 963.1 tonnes. As seen in the last decade, Indian demand for gold will be driven by savings and real income levels, not by price. India: Heart of Gold is the second in a series of research with focus on India. The first paper, India Heart of Gold: Revival was released in November 2010, and focussed on the historical demand of the past 10 years and the revival in 2010. Together they form a compendium, with the latest research including forecasts from the Centre for Monitoring the Indian Economy (CMIE), as well as contributions from leading academics and industry experts, Dr. D. Pattanaik and Dr. R. Kannan, which have been specially commissioned for the World Gold Council. Ajay Mitra, Managing Director, India and the Middle East, World Gold Council, said: "The rise of India as an economic power will continue to have gold at its heart. India already occupies a unique position in the world gold market and, as private wealth in India surges over the next ten years, so will Indian demand for gold." "In parallel to growth, socio and demographic challenges will need to be addressed given its immense diversity. This also applies to the gold market. Nevertheless, gold purchasing will continue, underpinned by India's long-standing and deep cultural affinity for gold; a love affair which transcends generations and makes India unlike any other gold market." India's role as a key driver of global gold demand is reaffirmed by the research: At more than 18,000 tonnes, Indian households hold the largest stock of gold in the world. Gold purchases in India accounted for 32% of the global total in 2010 The CMIE forecasts that India's annual real GDP will grow at over 10% from 2010-15, before slowing to an average rate of around 8.4% until 2020 The vast majority of the Indian population (70%) live in villages, which have traditionally formed the source of more than two thirds of Indian gold demand This sector has been growing at less than 1% per annum but is projected by CMIE to grow in future at over 5% per annum, further fuelling gold demand Mahesh Vyas, Managing Director & CEO of the CMIE, said: "Our macroeconomic forecast to 2020 shows India is poised for a very strong period of economic growth and this has significant, positive implications for all forms of gold purchasing in India." "Our findings endorse the fundamental strength of the Indian gold market. We predict that new demand for gold will be driven by rapid GDP growth; urbanisation; the emergence of a strong middle class; and a sustained and potentially rising savings rate of 30-40% of income." The studies highlight that, in India, categories of demand that can be observed in other markets are less distinct: The motivation for a jewellery purchase can be inextricably linked to value, wealth preservation and growth rather than pure adornment - there is therefore little distinction between investment and jewellery demand Gold is integral to all Indian wedding ceremonies: purchases relating to Indian weddings typically account for 50% of annual jewellery demand With 50% of the Indian population under 25 and approximately 150 million weddings anticipated over the next decade, the World Gold Council estimates that wedding-related purchasing will drive approximately 500 tonnes a year A further 500 tonnes of existing gold will be gifted by one family to another Mr Mitra added: "Furthermore, gold will remain auspicious given its connection with tradition, whether religious or attitudinal." "Indians tend to be risk averse and place great faith in the wealth preservation qualities of gold, which inspires confidence, stability and security. Therefore, the view that Indian demand for gold will be driven by the concept of enduring value, not price." A detailed historical and econometric study by Dr. Kannan finds that India's gold demand is influenced not only by the price of gold, but by macroeconomic, monetary and policy variables which include income, the interest rate, the exchange rate, personal income tax, government spending and wealth. This is further endorsed by proprietary research from the World Gold Council which shows that over the last five years, future gold purchase intent in India has remained demonstrably stable, in spite of rising gold prices during this period.

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