Indian households spend more money on gold than on apparel, consumer durables and entertainment, as the precious metal makes up for 8.13% of their total expenditure, just trailing expenses on food & groceries, education and medical facilities, according to a latest survey by Ficci on behalf of the World Gold Council.

The survey, a part of a report titled “Why India Needs A Gold Policy”, has thrown up some interesting findings: As many as 77% of respondents bought gold last year despite the crackdown by the government and the RBI and more than a half of them bought more gold in 2013 than in the previous year; roughly 77% said they bought the precious metal due to its safe-haven status and 53% consider it primarily an adornment, while half of the respondents believe gold serves both the purposes.

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In a boost to the debate on firming up policies to monetise household stocks, the survey revealed a half of the respondents say they are willing to deposit gold if they get an interest on it and a further 12% say they may consider doing so. Importantly, 72% of them say they have no problems in their gold jewellery or coins getting melted after they deposit it in a bank.

“This study serves to demystify several myths, including the notions that Indians are averse to the idea of melting their jewellery and they may not deposit gold in a bank even if a proper and transparent system is carved out,” Somasundaram PR, managing director (India) of WGC, told FE. “The idea is to generate a wide-ranging debate involving various stake holders on the need for the country to look beyond the restrictive measures to tackle gold imports in the long run,” he added.

As the economy grows and more and more people come out of poverty, demand for gold will automatically rise, Somasundaram said. “We need to have a concrete road map as to how we can deal with such a situation. This is because we can’t curtail demand by targeting supplies, as supplies will then find other avenues of creeping into the system. One of the solutions to reduce imports could be to source idle gold stocks from domestic households and put it into productive use,” he said.

Ficci secretary general A Didar Singh said, “The consumption of gold has always been greatly intertwined with the household’s financial planning goals and has, through generations, remained an obvious and natural choice of saving.”
Nirupama Soundararajan, lead author of the study, said the country needs to establish an India Gold Exchange.