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Rithwija Das 25ECOA20 Department of Economics (UG) Kristu Jayanti (Deemed to be University), Bengaluru |
On Dhanteras, millions of Indians rush to buy gold believing it brings prosperity and luck. What began as a cultural ritual has gradually evolved into one of the nation’s largest annual “investments.” For generations, gold has represented emotional security, social prestige, and financial safety. Beneath this glittering tradition lies an economic contradiction. India’s deep-rooted faith in gold provides households with comfort but simultaneously limits the country’s broader economic potential. In a country where financial markets can seem confusing or risky, gold feels familiar and trustworthy.
Behavioural economics, the study of how emotions affect financial decisions, helps explain this trust. Two main reasons are risk aversion (fear of taking risks) and loss aversion (fear of losing money). Most people prefer a safe, small return over a risky but possibly higher one. Gold fits that mindset perfectly. It seems stable, even when markets are unpredictable. There’s also the opportunity cost, the missed chance to use that money for something more useful. If people invested even a part of what they spend on gold into things like businesses, stocks, or infrastructure, it could create jobs and boost the economy. And while gold feels safe, it doesn’t always give great returns.
Looking beyond gold: While gold holds cultural and emotional value, exploring additional ways to invest can strengthen our financial future. The government has introduced Sovereign Gold Bonds (SGBs), which give a small annual interest while still being linked to gold prices. These are safer for the economy because they reduce the need for physical gold imports. People can also explore mutual funds, fixed deposits (FDs), and Systematic Investment Plans (SIPs), which are all easy ways to grow money safely. For instance, various banks provide Balanced Advantage Fund or Bluechip Fund which are popular mutual funds that spread money across different companies, lowering risk while offering better long-term growth than gold. Similarly, fixed deposits in various banks give interest between 6–7% a year and are completely secure. For beginners, SIPs are a simple way to start investing small amounts regularly. Even ₹500 or ₹1,000 a month in mutual funds can make a big difference for the economy.
Gold is tied to our traditions, emotions, and sense of security. As India aims to be a stronger economy, to support faster economic growth, we should rethink how we use our savings.