 |
VOOZH | about |
|
VOOZH | about |
WITH INDIAN households holding 34,000 tonnes of gold (as of June 2025), the recent rise in prices has swelled the value of the precious metal that sits in lockers and almirahs of most homes.
In theory, this windfall should carry several benefits for the economy — boosting household wealth, strengthening consumer sentiment, and potentially, encouraging higher spending.
But that’s where gold glints differently. Much of the gold holdings remain locked in as unproductive assets – this is money that could have stayed as deposits in banks but instead sits as an imported asset in homes.
On March 13, the government hiked import duty on gold from 6% to 15%, hoping to check the drain on the country’s foreign exchange reserves that have fallen by $38 billion after the West Asia conflict began late February. This followed soon after the Prime Minister urged people to buy less gold.
Seventy per cent of gold in India is owned by households with less than Rs 5 lakh annual income, according to an April 2026 study by Sanjeev Prasad, MD & Co-Head, Kotak Institutional Equities. Those earning more than Rs 20 lakh a year hold less than 2%.
It’s a statistic that explains why asking people to buy less gold is easier said than done.
In India, gold ownership is spread deeply across millions of lower- and middle-income homes, which may not have huge quantities but for whom gold is both a social, cultural habit and often the only risk cover they understand and trust.
“Indians have an extraordinary attachment to gold. Even when prices rise sharply or become volatile, people continue to buy it…Gold is special because it serves two purposes at the same time. It is both a consumer product and an investment asset. People wear it during festivals, weddings and family functions, but they also buy it to protect wealth. Unlike many financial assets, gold is seen as a safe store of value during economic uncertainty,” said Nilesh Shah, MD and CEO, Kotak Mutual Fund.
Citing historical reasons for Indians’ affinity for gold, he said, “Gold and silver were universally acknowledged as a medium of exchange. India was the largest economy of the world and exporter of spices to textiles to the world. Naturally it collected gold and silver through trade. Over the years, the prosperity of India attracted invaders. You had to run at short notice with whatever you had. Gold was a convenient way to save as well as move.”
Umesh Mohanan, ED & CEO at Indel Money, said, “Gold is not merely an investment asset in India, it is an inter-generational store of wealth that families pass on across generations, especially in semi-urban and rural regions where access to sophisticated financial products remains limited.”
“Most importantly, Indians view gold as a long-term appreciating asset. While short-term price fluctuations are inevitable, the long-term trajectory of gold has historically remained positive, reinforcing investor confidence and sustaining demand even at elevated price levels,” he said.
Chirag Mehta, Chief Investment Officer, Quantum AMC, said dissuading gold purchases to curb imports and manage Current Account Deficit has in the past backfired. “Past analysis consistently shows that this hasn’t worked as intended as household balance sheets have a higher preference for gold and high duties have created second-order effects like price distortions and illicit imports,” he said.
