At $5 trillion, India's household gold worth more than GDP
What's the story
India's love for gold has reached a new high, with the country's household gold reserves possibly surpassing the $5 trillion mark. This is largely due to the recent spike in global gold prices, which hit record highs above $4,500 per ounce. A Morgan Stanley report from October 2024 estimated that Indian households hold around 34,600 tons of gold. At last week's record high of $4,550 per ounce, that translates to more than $5 trillion in household wealth.
Economic impact
India's gold reserves surpass GDP
The value of India's household gold reserves now exceeds the country's GDP, which is around $4.1 trillion according to the International Monetary Fund. This stark contrast highlights the cultural and economic significance of gold in India, even as it races toward becoming the world's third-largest economy. "It is a striking statistic that invites deeper reflection rather than a literal comparison," Dr. Manoranjan Sharma, Chief Economist at Infomerics Valuation and Ratings told ET Markets.
Cultural significance
Gold's role in India's economy
Sharma emphasized the unique position of gold and the US dollar as global safe-haven assets for nearly eight decades. He said, "In periods of heightened global or domestic uncertainty—wars, financial crises, inflationary episodes, or geopolitical stress—investors and households instinctively gravitate toward these two stores of value." Despite its economic implications, gold remains a deeply embedded social institution in India.
Economic implications
Gold's impact on India's economy and policy challenges
Sharma noted that large imports of gold affect the current account deficit, influence exchange rates, and constrain monetary policy transmission. He also highlighted gold's dual role as a shadow financial system—providing liquidity through gold loans when formal credit access is limited. Policymakers have tried to shift household savings toward financial alternatives such as gold ETFs, sovereign gold bonds, and digital gold over the past two decades with limited success due to tradition, tangibility, and trust in physical gold.
Strategic shift
Central banks' gold accumulation and its impact
Sharma also pointed out that aggressive accumulation by central banks, especially the People's Bank of China, has been a major factor driving gold prices to record highs. He said, "Several countries are diversifying reserves away from the US dollar, reducing exposure to geopolitical risk, and strengthening monetary sovereignty." This large-scale official-sector demand is pushing global gold prices higher and reinforcing its status as a strategic asset rather than merely a commodity.