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Informist, Monday, Jul. 28, 2025

NEW DELHI – Gold, which has a 1.1% weightage in the CPI, has on average contributed around 20% to core inflation in the last 12 months, Minister of State for Finance Pankaj Chaudhary said Monday.

Core inflation averaged 3.8% in the 12 months to June while headline CPI inflation was 4.1%. Core inflation has been rising for a few months and hit a 21-month high of 4.4% in June. Headline retail inflation, on the other hand, has been declining for eight consecutive months and fell to a 77-month low of 2.10% last month. 

Core inflation--inflation without food and fuel items--has been rising largely because of higher gold prices. "Gold in India serves a dual role--not only as a consumption item, but also as an investment avenue, as it is considered a safe haven asset for hedging against uncertainties," Chaudhary told the Lok Sabha in a written reply. "Thus, an increase in gold price positively influences household consumption through the wealth effect, as the notional value of existing gold holdings appreciates."

Chaudhary said sustained high gold prices may have differential effects across states or population groups. "However, it can also be viewed as a conversion of one asset (cash) into another (gold), with the potential for appreciation in value over time."  End

Reported by Shubham Rana

Edited by Rajeev Pai

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