Feature: An inch of gold equals a mile of good times in India

In 2011, India imported 1,000 tons or a fifth of the global annual supply of gold, making it the world's top importer.

In February this year, gold imports reached 50 tons, which is 82 percent more than a year earlier.

This huge recovery was made after gold imports fell to nearly 44 percent to its lowest level in 13 years in 2016.

At present, India has 20,000 tons or around 10.9 percent of the 1,83,000 tons of gold in existence. Despite being a growing economy, India continues to be world's second biggest consumer of the precious metal. It is the largest net importer of gold, despite China having surpassed India as the largest consumer.

Such is the fascination of the Indians with gold that it is associated here with religion, culture and tradition. It is often said that any festival or auspicious events like weddings in India are incomplete without a touch of gold.

And for old and young generations, gold is a fashion statement. It has become a sign of opulence to the extent that people no longer showcases only their class with gold, but also use it as a means to store wealth.

Research from the World Gold Council found that while around half of people (53 percent) in India considered gold to be a fashion choice, a whopping 77 percent bought it as a safe investment.

According to the gold council report, gold jewelry accounted for about 75 percent of the total Indian gold demand in 2009, the remaining 23 percent being investments and decorative and industrial use accounting for 2 percent.

"We often feel that if India sheds one tear of gold ever, the entire global gold market will crash," said an official of the World Gold Council, pointing towards the irresistible attraction of Indians towards the yellow metal.

This desire often runs through generations and bloodlines of Indian families.

"Gold is part of our family values. I own several pieces of my grandmother's jewelry and I want to pass on my own gold pieces to my children," said Manisha Singh, a homemaker in Delhi.

"We never think of parting with them under any circumstances. I feel our family picture would be incomplete without our gold jewelry," she said.

But tradition explains only a part of this gold obsession. Its accumulation and purchase is often highlighted by economists and experts as being a rather modern phenomenon.

The statistics show that this might be true. In 1982, India consumed 65 tons of gold. This was at a time when any gold import was banned and it was smuggled in to match the low prices in other countries.

"After deregulation in early the 1990s, gold prices almost exploded and it became a serious investment even for the commoners. Over the years, gold started to enter India legally through banks and registered financial firms. As its prices soared between 2002 and 2011, gold became a convenient way to store wealth just like property," said Nayan Roy, an expert.

He added: "Even after the recent demonetization in 2016, people paid 67 percent above the going rate for gold in exchange for the old currency, seeing the metal as the safest investment."

Time and again, however, the government and experts alike have ridiculed Indians' obsession with gold and pointed out the need to curtail imports of the yellow metal to improve trade deficit.

This is because the allure of gold is limited only towards accumulation and India itself produces almost no gold.

In fact, in 2013-2014, the country produced 1.4 tons of gold. This appetite for gold has often worried the respective Indian governments, which have taken several attempts to curb it. In 2013, the then Congress-led Indian government had raised the gold import duty to 10 percent to counter the widening current account deficit.

After coming to power, Prime Minister Narendra Modi's government, worried that the gold demand may touch 2014's level of 975 tons, decided to consider restricting shipments to protect the country's current account worries.

On Nov. 5, 2015, the prime minister launched the sovereign gold bonds, saying: "India has no reason to be described as a poor country, as it has 20,000 tons of gold which should be put to productive use."

The central government decided to mobilize unused gold in households and institutions by offering tax free interest on gold deposits. However, the scheme barely found any takers. In response to a parliament question recently, the government revealed that until mid-February this year, the scheme has led to deposits worth only 6,410 kg of gold since its launch, less than 2 percent of gold imported in 2016.

While the tepid response was perceived to be due to the low rate of interest offered by the scheme, it was found that not many people were interested in parting with their gold.

In an independent survey by a non-government organization, People Research on India's Consumer Economy, it was also revealed that even the wealthy and educated households were not enthusiastic about depositing their gold savings in banks and were against the attempt of the government towards gold monetization.

The respondents continued to view gold as long-term security prospect and a chance at making capital gains through it and saving it for liquidity. Another reason is also the sentimentality attached with heirlooms that come in the form of gold.

The gender aspect to it is also important as gold jewelry allows women to exert control over ownership and inheritance.

"I would never put my gold in this scheme because while I have this I can use it anytime I want. Parting with my gold will make me feel insecure. It is not a viable option and I need access to it in times of urgent need," said Preeti Sabarwal, a teacher based in Delhi.

What is it that drives Indians towards gold despite economic growth and urbanization, the two factors considered preeminent towards reducing dependence on physical forms of savings?

The question will be difficult to answer. However, it does seem that the Indians truly believe that an inch of gold is equivalent to a mile of good times and rich dividends in the future. Endit