India's 25,000 tonnes of household gold propping up economy, emerge as shock absorber: Report

New Delhi [India], January 6 : India's household gold stockpile, which is estimated at around 25,000 tonnes, has quietly emerged as one of the country's most important macroeconomic shock absorbers, offering support to currency stability, financial resilience, and consumption at a time of global uncertainty.

According to IIFL Capital's Outlook 2026, the market value of household gold is now close to 80% of India's GDP, a dramatic rise driven by both long-term accumulation and a sharp surge in gold prices over the past year.

"Consumption has been bumped up from tax cuts and growth should revert to normal (it is usually very difficult to stimulate consumption). Indian households have ~25,000 tons of gold, and the proportion used up as collateral is very low," the report said.

The report highlighted that in 2025, the Reserve Bank of India (RBI) stepped up gold purchases just as global gold prices rallied sharply.

The combination (household gold and RBI purchases) helped cushion the impact of rupee depreciation and strengthened India's external balance at a time when foreign portfolio flows were under pressure, it said.

With foreign exchange reserves comfortable and gold forming a rising share of RBI assets, policymakers now have greater flexibility in managing currency volatility.

It further highlighted that only a small fraction of household gold is used as collateral, leaving significant headroom for growth in gold-backed lending. As banks and NBFCs expand secured lending, this collateral pool can support credit growth without materially increasing systemic risk especially important in a phase where unsecured retail lending has shown signs of stress.

This matters for consumption as well. Gold-backed credit allows households to smooth spending during downturns without resorting to high-cost borrowing, helping stabilise demand when income growth slows.

"Lending is not to the aggregate economy but to families, substantial economy level gold collateral makes for strong chances of secured lending growth and household consumption in India. Amount of gold as collateral divided by the total gold owned is low, thus gold lending can increase," it said.

The gold cushion reinforces this strength by acting as latent capital, available in times of stress but not fully drawn down during booms, the report mentioned.

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