Indians spent a whopping $267 billion (Rs. 18 lakh crore) on buying gold over the last ten years, even as the prices of the precious metal went up by over 250 percent during the same time.
Currently, India is the world's second biggest consumer of gold, next only to China. Nearly three-fourths of the gold imported by the country is consumed by retail buyers for jewellery.
"Even as foreigners were putting in money in Indian equities, Indians were busy buying gold," said Akhilesh Tilotia of Kotak Equities in a note to NDTV PROFIT.
On the flip side, Indians' interest in gold has negatively impacted the country's economy, it said.
"Indians continued to buy gold thereby precipitating worries of large slippages on the current account deficit. The government progressively imposed customs duties of 10 per cent on the value of gold -- imports did come down somewhat, but this helped boost its price in local markets," according to Kotak Equities.
About 77 percent of the gold demand in India in the calendar year 2015 was for jewellery purposes, according to the World Gold Council.
"India's fascination for gold derives from (1) a lack of financial inclusion: gold serves as an easy store of value, is easily monetise-able and is available in reasonably small unit sizes, (2) a hedge against inflation and/or currency depreciation: around half the 'returns' of gold to Indian investors over the past 10 years have come from currency depreciation and import restrictions," the note said.
In December last year, All India Gems and Jewellery Trade Federation had estimated India's gold imports to increase by 11% to 1,000 tonnes in 2015. A third of gold purchases in the country happens in the December quarter on account of seasonal demand.
To keep a check on rising gold imports, Prime Minister Narendra Modi had launched three gold schemes on Nov. 5 last year.
Households and institutions in India hold an estimated 22,000 tonnes of gold directly or indirectly, which is worth about $800 billion or 39% of the country's gross domestic product (GDP).