In the context of the theme of the conference, some may ask this question whether one could hedge the inflation risk and thereby escape the shrinking value of money. In India, many seem to use gold as an inflation hedge, and high gold prices of recent years, as we know, has not deterred gold buying in India. The basic law of demand – i.e.
when prices increase demand must decline – does not seem to apply to demand for gold by Indians. High inflation is a risk to financial savings, since it can reduce the value of savings accumulated over the years. Making financial instruments available in the system that could provide an effective hedge against inflation assumes importance in this context.