We know that Indians love hoarding gold. The relentless demand for this metal has meant that huge quantity has had to be continually imported. This year, when a serious current account deficit resulted, he Govt had to bring in restrictions and impose higher import duty to curb the inflow. According to many analysts, this move did not provide desired results as the demand was met through illicit channels and smuggling.
This tendency to hoard metal has been ingrained in the Indian psyche for hundreds of years. The book, “The rise, progress, and present condition of banking in India” by Charles Northcote Cooke, published exactly 150 years back, in 1863, makes the following observation on Page 71 (link)
"The eagerness of the natives for gold and silver ornaments will account, in a great measure, for the great importation of silver, and its disappearance in India, which PLINT aptly terms " the sink of the precious metals." The extent to which hoarding has been,and, in the Upper Provinces, is still practised, is almost incredible. Money-lenders generally keep their whole fortune, in coin, hidden about the house, and merely produce it when needed. Rich natives hoard as well as poor. Some years back, the King of Oude had half a million sterling secreted in coin. At Benares, a Rajah had a quarter of a million. Runjeet Singh, in the Punjab, one million. The late King of Ava a million and a half. When Scindia's fort was taken, there was found at least a quarter of a million. At the siege of Bhurtpore, one million is said to have been found by the British troops. At the taking of Seringapatam one million was found: and, it is positively asserted, that when the Emperor Shah Jehan died, he left no less a sum, in coin, than 24 millions sterling, all wrung from his impoverished subjects.
In the early part of 1856, Colonel Sykes, the Chairman of the East India Company, published an interesting paper on the External Commerce of British India, in which occurs the following passage:—" The excess of exports (from India) over imports is constant, owing to the gradual improvement in the producing powers of the country, and the small wants and hoarding habits of the natives in their present low state of civilization.Within the present century, India has received above 100,000,000 pound Sterling, which has never left the country. The silver received has been chiefly in coin, yet it has not in any appreciable manner affected prices." There is little doubt but that just before the mutiny of 1857-58, the expectation, throughout the country, of some great and terrific event, led to a more than ordinary absorption and secretion of the precious metals, which were converted into bracelets, anklets, earrings, necklaces,and waist-bands, as the safest mode in which treasure could be preserved. At the late sale of Kirwee prize property by Messrs. Hamilton and Co., there were to be found massive silver trappings of an elephant with chains sufficiently thick and large to serve as the ground tackling of a vessel of twenty-five tons."