NewKerala.com

India's 25,000-Tonne Gold Hoard Acts as Economic Shock Absorber

India's vast household gold stockpile, valued at nearly 80% of GDP, is serving as a critical macroeconomic stabilizer. It has helped cushion the rupee from depreciation pressures and strengthened the country's external balance. The low usage of this gold as collateral presents significant headroom for expanding secured lending, supporting credit growth without major systemic risk. Furthermore, gold-backed loans allow households to smooth consumption during economic downturns, providing a latent capital buffer for the economy.

Key Points: India's Household Gold Stockpile Stabilizes Economy

  • Gold value near 80% of GDP
  • Cushions rupee depreciation
  • Supports secured lending growth
  • Stabilizes household consumption
2 min read

India's 25,000 tonnes of household gold propping up economy, emerge as shock absorber: Report

A report reveals India's 25,000 tonnes of household gold supports currency stability, credit growth, and consumption, acting as a key economic buffer.

"Indian households have ~25,000 tons of gold, and the proportion used up as collateral is very low - IIFL Capital Report"

New Delhi, January 6

India's household gold stockpile, which is estimated at around 25,000 tonnes, has quietly emerged as one of the country's most important macroeconomic shock absorbers, offering support to currency stability, financial resilience, and consumption at a time of global uncertainty.

According to IIFL Capital's Outlook 2026, the market value of household gold is now close to 80% of India's GDP, a dramatic rise driven by both long-term accumulation and a sharp surge in gold prices over the past year.

"Consumption has been bumped up from tax cuts and growth should revert to normal (it is usually very difficult to stimulate consumption). Indian households have ~25,000 tons of gold, and the proportion used up as collateral is very low," the report said.

The report highlighted that in 2025, the Reserve Bank of India (RBI) stepped up gold purchases just as global gold prices rallied sharply.

The combination (household gold and RBI purchases) helped cushion the impact of rupee depreciation and strengthened India's external balance at a time when foreign portfolio flows were under pressure, it said.

With foreign exchange reserves comfortable and gold forming a rising share of RBI assets, policymakers now have greater flexibility in managing currency volatility.

It further highlighted that only a small fraction of household gold is used as collateral, leaving significant headroom for growth in gold-backed lending. As banks and NBFCs expand secured lending, this collateral pool can support credit growth without materially increasing systemic risk especially important in a phase where unsecured retail lending has shown signs of stress.

This matters for consumption as well. Gold-backed credit allows households to smooth spending during downturns without resorting to high-cost borrowing, helping stabilise demand when income growth slows.

"Lending is not to the aggregate economy but to families, substantial economy level gold collateral makes for strong chances of secured lending growth and household consumption in India. Amount of gold as collateral divided by the total gold owned is low, thus gold lending can increase," it said.

The gold cushion reinforces this strength by acting as latent capital, available in times of stress but not fully drawn down during booms, the report mentioned.

- ANI

Share this article:

Reader Comments

A
Arjun K
25,000 tonnes! That number is mind-boggling. It makes sense though. Every festival, wedding, or even a child's birth, we buy gold. It's ingrained in our culture. Good to see this traditional saving habit is now being recognized as a national economic asset. Jai Hind!
R
Rohit P
While the sentiment is positive, we must be cautious. Promoting too much gold-backed lending could trap families in debt cycles, especially in rural areas. The report says it's low-risk, but if gold prices fall sharply, many could be in trouble. The focus should remain on creating income growth, not just leveraging existing assets.
M
Michael C
Fascinating analysis from an international perspective. In the West, we think of gold as an investment or a hedge. In India, it's a deeply embedded social and financial instrument. This "latent capital" concept is powerful—it's like a massive, decentralized stabilization fund held by the people.
S
Shreya B
My nani always said, "Sonay pe suhagan" (a woman's adornment is her gold). Now I understand the deeper meaning. It's empowering for women too—often it's the only asset in their name. This report shows that our household savings, often managed by women, are propping up the whole economy! 👏
K
Karthik V
Smart move by RBI to increase gold reserves. With global uncertainty, it's better than holding only dollars or euros. Our people's love for gold, once seen as unproductive, is actually giving the country a strategic buffer. Who knew tradition could be so economically savvy?

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50