India sitting on a $2 trillion treasure that’s unproductive. Navneet Munot on how to make it work for the economy

Navneet Munot, Managing Director and CEO of HDFC Asset Management Company (AMC), has called for a bold rethink on how India manages its massive holdings of precious metals. Speaking at the Moneycontrol Mutual Fund Summit in Bengaluru, Munot suggested that unlocking the value of precious metals held by Indians and channeling them into equities could generate significant benefits for the Indian economy.

“I’m just thinking aloud,” Munot said, “that if we allow gold and silver to be sold and put that into equity—say, through an ELSS with a five-year lock-in and no tax—there’s a real possibility that a lot of people would monetise those holdings and put them to more productive use. That would be very good for the country.”

Munot highlighted a critical behavioral insight about the so-called “wealth effect” in India. While rising asset prices in equities or real estate often make investors feel wealthier—leading to greater spending and economic activity—investor behaviour is different when it comes to their holdings of gold and silver.

“A lot of people talk about the wealth effect from rising gold and silver prices,” he said. “But unlike other asset classes, gold and silver don’t create a positive wealth effect in India. In fact, it’s often the opposite. When prices rise, people feel poorer because they believe their next purchase will be more expensive. They don’t spend more; they save more to buy even costlier gold later.”

Munot contrasted this with equities and property, where rising valuations typically encourage consumption and investment. “If you own stocks or a second property and the prices go up, there’s a psychological lift. People spend that money somewhere, even without realizing the gains. That positive sentiment just doesn’t happen with gold or silver,” he explained.

India, one of the world’s largest consumers of gold, holds an estimated couple of trillion dollars’ worth of the metal—most of it sitting idle in households and lockers. Munot emphasised the need to bring these assets into the formal financial system.“As holdings increasingly move into ETFs and gold funds, we might eventually see some wealth effect,” he noted. “But the bigger question is: how do we channel this vast, unproductive stock of gold and silver into productive uses for the nation’s growth?”