Unlocking India's Gold: The Financial Shift

India's gold reserves, largely held by households and temples, could significantly benefit its economy if shifted toward financial instruments. By reducing bullion imports and easing the current account deficit, enhanced gold financialisation is encouraged by experts, highlighting the need for regulatory changes and dematerialisation through Electronic Gold Receipts.

Former Union Minister P P Choudhary and top market figures have voiced a strong call for India to unlock the economic potential of its household gold stockpiles by shifting towards financial instruments. They argue that such a move could significantly reduce the nation's reliance on bullion imports and relieve pressure on the current account deficit.

Choudhary, a key player on the Parliamentary Standing Commission on Finance, emphasized that financialising gold would allow greater contributions from the gems and jewellery sector, which already makes up 15% of merchandise exports and employs about 5 million people. At an Assocham event, experts highlighted that India's households and temples hold an estimated 50,000 tonnes of gold, worth around USD 10 trillion, mostly outside the formal financial system.

Sriram Krishnan from the National Stock Exchange urged the government to support the shift through Electronic Gold Receipts (EGR), a SEBI-backed initiative for stock exchange trading of gold like shares. Despite obstacles like a 3% GST on surrendered gold under EGR, rapid financialisation is seen as crucial, especially as gold prices soar and the demand for jewellery persists.