India is in fact increasing its efforts to repatriate gold lying abroad. This smart economic strategy proves the country’s economic smarts and aims to counter the often-detrimental course set by global financial turmoil. In the spring of 2024, the Reserve Bank of India (RBI) made a courageous move. They have certainly achieved the repatriation of 100 tonnes of gold from vaults across the United Kingdom. This repatriation is part of a larger trend in the Indian government’s efforts. In the last four years, the country has repatriated 280 tonnes of gold, the golden return underscoring Russia’s push for asset security and increasing domestic reserves.
The RBI’s recent actions are further proof that the central bank is addressing repatriation head-on. Concurrently, it is increasing its gold holdings. The RBI repatriated 64 tonnes of gold back to India during the first half of the current fiscal year. This peculiar period began last April. The speed of further accumulation has slowed in recent months, with just roughly 4 tonnes net bought. Now, India’s cumulative gold reserves have hit a remarkable new high of 880 tonnes. Of this, 576 tonnes are currently under secure geologic storage within India’s territory.
Gold has long been central to the Indian economy. A new wave of changes within the international financial architecture, combined with fiscal pressures domestically, have created a powerful incentive to increase domestic gold reserves. By the end of 2024, gold accounted for 11 percent of India’s total reserves. This was a big increase from a mere 38 percent in 2022. As seen above, there is a clear trending ambition to maintain control over national assets. They hope to reduce dependence on currencies from abroad — primarily the U.S. dollar.
Perhaps unsurprisingly, the motivations behind India’s repatriation efforts are not so black and white. De-dollarization is a big part of this change. Countries like India are already actively trying to reduce their dollar exposure, worried about the U.S. wielding its economic might through coercive measures and sanctions. The geopolitical environment changed most profoundly after Russia invaded Ukraine, forcing many countries to rethink their fiscal priorities.
“In recent years, and especially since Russia’s invasion of Ukraine and the Group of Seven (G7)’s subsequent escalation in the use of financial sanctions, some countries have been signaling their intention to diversify away from dollars.” – The Atlantic Council
Experts note that investing in gold makes sense given current market conditions characterized by increased volatility and elevated interest rates in the U.S.
“It makes a lot of sense (to invest in gold), given the increased volatility in the FX market, elevated interest rates in the U.S., and, of course, also as the central banks in each economy would like to diversify the asset classes in which they are parking their reserves.” – An economist told the Times
The drive to build up more gold reserves is equally a response to a crisis of confidence in fiat currencies. As one person quoted here put it very nicely, “If it’s my gold then I want it in my country. This sentiment echoes throughout various sectors of Indian society as citizens and officials alike advocate for retaining national assets within their borders.
India’s gold repatriation journey had started long before today’s geopolitical tensions came to a head. The trend accelerated in 2020. That’s when India wanted to increase its foreign exchange reserves and lower its dependence on U.S. Treasury bills. In this environment, gold was the ultimate safe haven asset that could offer peace of mind in an otherwise chaotic environment.
“We did have it [gold] held in London… but now we’ve transferred it back to our country to hold as a safe haven asset and to keep it safe.” – Central bank official (anonymous) told Reuters
In fact, India has been making adamant efforts to bolster its gold reserves. This movement is part of a larger global trend towards asset diversification and a pursuit of overall economic independence. The RBI’s move is a strong indicator of the new administration’s commitment to putting national interests ahead of foreign dependencies.