At a time when the Russians and Chinese are stockpiling large amounts of gold, India is amassing silver. Although not heavily covered in the mainstream media, this is a big deal, because India’s huge population (and growing number of billionaires) means that if only a tiny percentage of their population continues buying, the price impact on silver could be significant, to say the least.

What Is Causing This Demand?

Historically, Indians have prized gold, to the extent that India is the world’s second biggest consumer of the yellow metal. However, what many don’t realize is that Indians covet silver just as much, perhaps more. They use it for religious objects, investment and jewelry, and because their nation numbers over 1 billion people, it is estimated that 1/6^th of the world’s silver is consumed by Indian citizens.

Recent economic policies by the Indian government under Prime Minister Narendra Modi might have also contributed to the sudden interest in silver. A few years ago, he made the decision to remove the nation’s two largest denomination banknotes, which were the 1,000 rupee and the 500 rupee. This quickly sent the nation into chaos, since tens of millions had been saving their money in these notes and suddenly had to turn them in to receive lower denominations. This had to be done by a specific deadline, otherwise holders of the 1000 and 500 rupee would find that their currencies (and savings) were worthless, since no shop would accept them.

The hardship caused by this fiscal decision is hard for those outside of India to comprehend. Many Indians were forced to wait in long lines, usually for hours, just to turn in their cash, only to find that few and sometimes no fresh bills were available in exchange. In extreme cases those who were unable or unwilling to turn in their notes simply took their own lives, as the loss of their life savings caused irrevocable damage.

India is Still Primarily A Cashed Based Society

Although India has a powerful military with atomic weapons, the world’s second biggest population and one of the fastest growing number of billionaires, like many nations in the Southern Hemisphere it is still primarily cashed based. While Europe and North America steadily move away from cash into electronic payments, most Indians still rely on cash and many don’t even have bank accounts.

The Modi administration wants to change this, but many Indians are reluctant to follow suit. Aside from the fact that a large segment of the population lives in rural areas which are far from banking centers, the high level of corruption  means that many Indians do not trust banks and maintaining deposits there makes it easier for governments to monitor, seize and tax at will. Many both in and outside of India see the currency recall by Modi as a power play and the decision of Indians to begin switching to silver and gold is a sign that the population wants real money that is not controlled by the whims of a single man.