India Urged to Mobilize $10 Trillion Household Gold into Financial System
India must significantly accelerate efforts to channel its enormous household gold holdings into formal financial instruments, according to former Union minister P P Choudhary and senior market participants. They warned that continued physical hoarding of the precious metal severely limits its broader economic contribution to the nation.
Call for Deeper Financialization of Gold
Speaking at an Assocham event, Choudhary, who serves as a member of the Parliamentary Standing Commission on Finance, emphasized that deeper financialization of gold could substantially help reduce the country's heavy reliance on bullion imports. This strategic shift would also ease pressure on India's current account deficit, creating a more stable economic environment.
"We have the platform, we have the capability, we have the technology," declared Sriram Krishnan, chief business development officer at the National Stock Exchange. He highlighted that India's households and temples together hold an estimated 50,000 tonnes of gold, valued at approximately USD 10 trillion, with the vast majority existing outside the formal financial framework.
Electronic Gold Receipts and GST Hurdle
Krishnan called for urgent policy measures to remove barriers to dematerializing gold through Electronic Gold Receipts (EGR). This Securities and Exchange Board of India-backed mechanism allows individuals to deposit physical gold and trade it on stock exchanges in a manner similar to shares.
However, a significant obstacle remains: a 3 per cent GST levied when gold is surrendered under the EGR framework. This tax imposition has hindered wider adoption of the system. The NSE has submitted a comprehensive white paper suggesting possible solutions to address this critical barrier.
Gold Market Dynamics and Economic Impact
The push for financialization comes during a period of remarkable gold price appreciation. Jitin Makkar, senior vice-president at ICRA Ltd, noted that gold prices have surged about 30 per cent in each of the past two fiscal years.
Despite this substantial rally, jewellery demand has remained remarkably firm. Major retailers have reported:
- Double-digit revenue growth
- Store network expansion of roughly 20 per cent in both FY25 and FY26
Makkar also revealed that gold loan exposure by banks and non-banking finance companies has increased dramatically in recent years, rising from around Rs 1 lakh crore to Rs 4 lakh crore.
Sector Contributions and Regulatory Progress
Choudhary highlighted the significant economic role of the gems and jewellery sector, which contributes approximately 15 per cent to India's merchandise exports and provides employment to nearly 5 million people across the country.
Makkar pointed to positive regulatory developments that have strengthened market confidence. Initiatives such as:
- Mandatory hallmarking requirements
- Introduction of Indian Good Delivery Standards
These measures have enhanced trust in domestically produced bullion and helped moderate import dependence to some extent, though much work remains to fully leverage India's gold wealth for broader economic benefit.
