Pandemic forces Indian households to give up most cherished asset: gold

This picture taken on August 11, 2021 shows a shop manager speaking with customers at a jewellery shop in Mumbai. (AFP/File)

• Coronavirus job losses left many Indians struggling to pay for daily life, forcing them to sell or pawn family gold to stay afloat
• World Gold Council estimates gold reserves across Indian homes, mainly in jewelry, are about 25,000 tons

NEW DELHI: When the first pandemic lockdown took Rakesh Pandey’s job in March 2020, he hoped to survive on the savings he had put aside over the years, but when a second devastating coronavirus wave swept the country months later, his family was forced, like millions of other Indians, to pawn their most cherished asset: gold.
India is one of the largest markets for gold, which plays a central role in its culture as a symbol of wealth, status, and with gifting golden jewelry being deep-rooted in Hindu rituals, especially of marriage. 
The World Gold Council estimated in 2019 that gold reserves across Indian homes, mainly in jewelry, were about 25,000 tons, which would be worth $1.4 trillion at today’s prices, making them the world’s largest holders of the precious metal.
As the pandemic and eventual lockdowns wreaked havoc on the economy, some 230 million Indians have been pushed into poverty, a study by Azim Premji University in Karnataka showed earlier this year. Business closures and job losses left many struggling to pay for daily life. Like Pandey, they had to sell or pawn their gold to stay afloat. 
Having spent six idle months in his hometown Bhagalpur in the eastern state of Bihar, Pandey returned to New Delhi to find work. He could not find a stable job as an accountant and was able to earn only as much as to make the ends meet. A second pandemic lockdown, in April this year, rendered him unemployed again. But this time he had no financial cushion to get by. He and his wife decided to take a loan, offering 200 grams of their wedding gold gifts as collateral.
“There was no option but to pawn the gold to survive the harsh lockdown,” the 32-year-old told Arab News earlier this week.
“This time the pandemic was so severe everywhere that we did not go back to our hometown. But to survive in Delhi I needed at least 10,000 rupees ($133) and after struggling for a couple of months, I was forced to resort to gold to sustain my life.”
Data from the Reserve Bank of India (RBI) shows that many Indians were in a similar situation.
In its annual report released on Sept. 30, the central bank said gold loans soared by 66 percent in August from a year earlier. Such types of loans are indicative of increased financial distress at Indian households, where they are a last resort in a crisis.
Local newspapers have lately been carrying full page advertisements inviting people to participate in gold auctions. But few want to come forward and admit they had pawned their inheritance.
“For a middle-class family pawning gold is not a prestigious development,” Pandey said. “Many don’t want to discuss such issues with outsiders.”
An employee at Muthoot Finance, one of the largest non-banking financial companies in New Delhi, said the pawnbroking sector is witnessing an “unprecedented spike” in demand for such lending.
“Compared to last year, there is a jump of at least 50 percent in the gold loan,” she said, adding that those who had lost their businesses often find it difficult to get normal loans at banks to address the financial crunch they are facing.
When a second wave of coronavirus infections devastated the country between March and May, out-of-pocket medical expenses also dealt a major blow to millions of Indians who desperately sought help to save their dear ones who required hospitalization.
“Large number of people in the second wave faced a health crisis,” Delhi-based economist Prof. Arun Kumar told Arab News, adding that at the same time people had exhausted their savings.
“Incomes have gone down, jobs are less, that’s why there is distress,” he said. “People pledge their gold only as a last resort and this is a reflection of the crisis in the middle class and lower-middle class after the second wave of COVID-19.”