There are a number of reasons why most people in India do not invest in stocks and invests in LIC or FDs instead. As a matter of fact, even less than 2.5% population of India invests in share market.

Few of the common reasons for the low participation of the population of India in share market are- Not willing to take the risk, common myths in the society like 'Investing is gambling', lack of proper guidance, lack of capital, preference towards the other easily available conservative assets like gold, property, FDs etc.

Nevertheless, one of the biggest reason why people do not invest in stocks in India is their unawareness towards stock market investing. They do not know how much returns they can get by investing in stock market.

A common villager doesn’t know how to earn from stocks and doesn’t understand the power of compounding.

A local retail shop owner does not know what is a demat or trading account and how to open one.

An old small-town electrician hasn’t ever met an investor or trader in his entire life.

Only if the people are more informed about stock market investing, then the participation of Indians towards stock market can be increased.

On the contrary, most of the Indians know about LIC or FDs and hence are willing to invest in it.

I hope the answer is useful.