Why is gold called a 'dead capital'?

When PM Modi recently urged Indians to skip gold purchases for a year, his Economic Advisory Council member Shamika Ravi backed it up with a sharper term: gold, she said, is a 'trapped asset' — what economists often call 'dead capital.'

It sounds harsh for something Indian families have trusted for generations. But the logic is simple.

Indian households own an estimated 25,000 tonnes of gold — more than any country, more than most central banks combined. At today's prices, that's well over $2 trillion sitting in lockers, safes, and bank vaults. And that's the problem. It sits.

'Dead' here doesn't mean worthless. It means the gold isn't doing economic work. A rupee in a bank gets lent to a business, funds a home loan, builds a factory. A gold chain in a locker just sits there. The owner can't easily borrow against it, the bank can't deploy it, the economy gets nothing from it. The wealth exists on paper but doesn't circulate.

The deeper sting is where the money goes. India produces almost no gold of its own — we import roughly 85% of what we consume, paid for in US dollars. In 2025-26, the gold import bill hit a record $71.98 billion, up 24% from the year before. Every wedding chain pulls dollars out of the country.

That matters right now because dollars are scarce. The Iran war has pushed crude oil past $120 a barrel, and India imports 85% of its oil too. Foreign investors have pulled over ₹1.8 lakh crore out of Indian stocks in 2025-26 alone. The rupee has slid more than 5% since February. In this squeeze, every dollar spent on gold is one less dollar to pay for oil, medicines, or machinery.

That's why on May 13, the government raised the import duty on gold and silver from 6% to 15% — a hard nudge to follow Modi's soft request.

The pushback is real. Congress calls it a 'death warrant' for the 3.5 crore people who work in jewellery and the MSMEs that make up 90% of that trade. The sector contributes 7% to GDP and 12% of exports. Telling India to stop buying gold isn't just an economic ask; it cuts into livelihoods, weddings, and a cultural reflex that goes back centuries.

So when you hear 'dead capital,' it's shorthand for a real tension: a mountain of household wealth that protects the family but drains the country. Modi's appeal is an attempt to unfreeze some of it, at least for a year.