The Socio-Economic Implications of Gold Price Inflation for Rural Households in India

Abstract

This paper examines the Socio-Economic Implications of Gold Price Inflation for Rural Households in India, focusing specifically on Tamil Nadu as a case study. Gold is considered a vital asset for economically disadvantaged families due to its accessibility, liquidity, cultural significance, particularly in matrimonial customs and its tendency to yield higher returns compared to assets like land or bank savings. The problem is acute because while gold prices have experienced tremendous inflation over the past 10 years, increasing from ₹27,445 to ₹85,300, the income of poor people in India has remained stagnant. This disparity has left the desire of many rural households to own gold unfulfilled. The study’s primary objectives were to examine the impact of rising gold prices on purchasing behaviour and financial planning, assess the effect on the socio-economic aspirations and emotional well-being of low-income families, and analyse the coping strategies adopted by these households. The methodology employed both primary and secondary data, with primary data collected from a purposive sample of 56 households in Mailam Village, Villupuram District. Empirical evidence shows that gold holds significant socio-economic and cultural value for the majority of respondents. A large proportion (67.9 per cent) of respondents reported experiencing pressure to buy gold for their daughter’s marriage. Due to price hikes, 68 per cent of respondents reported that their ability to purchase gold was affected, leading them primarily to reduce the quantity purchased or delay the purchase. Overall, 59 per cent of respondents had postponed or cancelled planned gold purchases. Furthermore, 75 per cent of respondents felt that rising gold prices have widened the gap between their aspirations and reality, and 60.7 per cent reported experiencing emotional stress or social discomfort due to their inability to afford gold. To manage inflation, the most common strategies adopted were delaying purchases until prices stabilise (53.6 per cent) and buying smaller quantities of gold (46.4 per cent).