$5 Trillion in Hidden Gold: How India Can Unlock a Massive Economic Boost

New Delhi: India’s households are sitting on a staggering 35,000 tons of gold, making them home to the largest private gold reserve in the world. At current market rates, this hoard is worth over $5 trillion—a hidden wealth that, if mobilized into the mainstream economy, could address multiple financial challenges for the country in one stroke.

The Scale of Hidden Gold:
To put this in perspective, the legendary Titanic could carry about 22,000 tons of passengers and cargo—still far less than India’s domestic gold stock. Between 2000 and 2025, India officially imported over 700 tons of gold, worth more than $507 billion, not counting smuggled gold and jewelry brought by travelers, which could push the total to $700 billion.

Potential Benefits of Mobilizing Gold:

1. Boost Government Revenue: Mobilizing household gold could fund major programs like the 8th Pay Commission and strengthen India’s fiscal position.
2. Increase Liquidity: Bringing gold into the economy would put cash into the hands of traders and households, boosting market liquidity.
3. Strengthen RBI’s Balance Sheet: Increased gold reserves would reduce India’s dependence on foreign capital.
4. Enhance Foreign Exchange Reserves: Higher reserves could improve India’s sovereign credit rating and reduce vulnerability to external debt.

Challenges and Solutions:
Two traditional methods exist for mobilizing gold:

• Amnesty Scheme: Taxed at 30%, though legally and psychologically challenging, and might face Supreme Court objections.
• Gold-backed Loans via Banks/NBFCs: Temporarily brings gold into the system without immediate government revenue.

However, a game-changing solution could be implemented by the Reserve Bank of India (RBI): a targeted gold purchase program. Under this scheme:

• RBI buys gold from citizens at current international market rates.
• 65% payment in cash immediately, and the remaining 35% as zero-coupon government bonds with a 29-year maturity.

Effectively, gold sellers receive full market value, while the RBI secures it at an effective cost of about 70% of market price, creating an indirect 30% tax benefit for the government without legal hurdles.

Economic Impact:

• Revenue: Buying $100 billion worth of gold at this structure could generate $30 billion in net gain, providing significant funds for public projects without additional borrowing.
• Liquidity: Traders and households gain immediate cash and bonds, increasing spending and capital availability.
• Balance Sheet Strength: India’s official foreign reserves would rise dramatically, potentially improving sovereign credit ratings.
• Current Account: Gold brought into the system can be sold to meet domestic demand, helping reduce the current account deficit.

Key Implementation Conditions:

1. Reduce import duties on gold to near zero before the program.
2. Engage jewelers as collection agents with attractive commissions.
3. Time-bound program (3–4 months) with a first-come, first-served principle, and a commitment not to repeat for the next 10 years to create urgency.

With immediate liquidity, market-rate incentives, and minimal legal barriers, this approach could transform idle household gold into productive capital, strengthen government finances, empower businesses and consumers, and enhance India’s global economic standing.

(Authored by Nilesh Shah, MD, Kotak Mahindra Asset Management)