The Reserve Bank of India (RBI) has significantly increased its gold purchases in recent years. In FY 2024-25 alone, it bought 57.5 tonnes, marking the second-highest annual acquisition since 2017. India’s total gold reserves have now reached 880 tonnes, up from 653 tonnes in FY20—a 35% rise in five years.
India Among Top Gold Reserve Holders
India, currently the world’s fifth-largest economy, now ranks seventh globally in terms of gold reserves. In 2015, it was tenth. As of the end of 2024, gold accounts for 11.35% of India’s total foreign exchange reserves, up from 6.86% in 2021.
Why RBI Is Focusing on Gold
The main driver behind this trend is global economic uncertainty. From the Covid-19 pandemic to the Russia-Ukraine conflict and weakening trust in the US dollar, central banks are turning to gold as a stable, safe-haven asset. Experts say RBI is diversifying away from the dollar due to its volatility and declining value.
Expert Views on RBI’s Gold Strategy
- Madan Sabnavis (Bank of Baroda): RBI aims to diversify its forex holdings to reduce dollar-related risks.
- DK Srivastava (EY India): The fall of the US Dollar Index from 110 to below 100 indicates a likely continuation of USD weakening, justifying greater gold allocation.
- Ranen Banerjee (PwC India): Ongoing volatility in the dollar and US treasury yields is prompting central banks to increase their gold reserves. Rising gold prices also make this an attractive strategy.
Impact on India’s Economy
The RBI has also brought back 214 tonnes of its gold holdings to India since 2022, ensuring more domestic control.
- Sachchidanand Shukla (L&T): Increasing and repatriating gold strengthens forex stability and insulates the economy from global shocks.
- Srivastava (EY): More gold reserves may support wider international use of the rupee and UPI, and also increase RBI dividends to the government.
- This trend may also aid in reducing reliance on the USD, especially as global oil prices ease.
