India’s domestic gold reserves increase to 60%: RBI Data

The Reserve Bank of India (RBI) has reported that India’s gold reserves have reached a new high, now making up 60% of the total reserves. This is a notable increase from 50% at the end of March this year. Let’s break down what this means and why it matters.

What Are Gold Reserves?

Gold reserves are the amount of gold that a country holds as part of its national wealth. Countries often keep gold as a way to secure their financial systems. Gold can be a stable asset during economic fluctuations, providing security for the economy.

Key Highlights from the RBI Report

1. Increase in Domestic Gold Reserves:
   • Between April and September 2024, India’s domestic gold reserves increased by over 100 tonnes, reaching a total of 510.46 metric tonnes. This is up from 408 metric tonnes at the end of March.
2. Total Gold Holdings:
   • As of September 30, the RBI holds 854.73 tonnes of gold. This is an increase from 822.10 tonnes at the end of the previous financial year, showing a steady growth in the country’s gold assets.
3. Gold Storage:
   • Out of the total gold holdings, 324.01 tonnes is stored with the Bank of England and the Bank for International Settlements (BIS), which are major international financial institutions. Additionally, 20.26 tonnes is kept as gold deposits.
4. Long-Term Growth:
   • Over the past five years, India’s gold reserves have grown from 618 tonnes to the current 854 tonnes. This growth highlights the importance of gold as a secure investment for the country.
5. Value of Gold in Reserves:
   • The value of gold in India’s foreign-exchange reserves has also increased. It rose from 8.15% in March to about 9.32% in September. This means a larger portion of the country’s reserves is now backed by gold, enhancing financial stability.

What About Foreign-Exchange Reserves?

In addition to gold, India’s total foreign-exchange reserves have seen significant growth. Here are some important points:

• Growth in Reserves: In the first half of this financial year, India’s reserves increased by $59 billion.
• Record High: The reserves reached a peak of $704.9 billion on September 27, 2024, although they slightly decreased to $690.4 billion by October 11.
• Net Increase: Since the beginning of this calendar year, India has added $68 billion to its foreign reserves, making it the second-largest holder of foreign reserves after China.

Why Are These Reserves Important?

• Import Coverage: India’s foreign reserves are sufficient to cover 11.8 months of imports, which is a crucial measure of economic health. It shows that the country can easily pay for goods and services from other countries for an extended period.
• External Debt Security: The reserves exceed 101% of the country’s external debt, meaning India is in a good position to handle any financial obligations it has to other countries.

Breakdown of Foreign Currency Assets

The RBI report also details the structure of foreign currency assets, which total $617.07 billion as of September 30:

• Investments in Securities: $515.30 billion is invested in various securities.
• Deposits with Other Central Banks: $60.11 billion is deposited with other central banks and the BIS.
• Commercial Bank Deposits: The remaining $41.66 billion is held in deposits with overseas commercial banks.

Conclusion

The recent increase in India’s gold reserves and foreign-exchange reserves is a positive sign for the country’s economy. It shows that India is strengthening its financial position and building a buffer against economic challenges. By holding a larger portion of its wealth in gold, India can help ensure its economic stability and resilience in a changing global market.