India's Gold Demand Soars: What This Means for the Economy
India's Rising Gold Consumption
New Delhi: In 2024, India emerged as the second-largest consumer of gold globally, with a staggering demand of 802.8 tonnes, representing 26% of worldwide consumption. This information comes from a recent report by SBI Research, which also highlighted that the Reserve Bank of India's gold reserves have reached 880 tonnes.
The domestic gold supply in India is minimal, with imports making up approximately 86% of the total supply in 2024, as estimated by the World Gold Council. Notably, gold imports surged by around 31% in FY24 and 27% in FY25.
Despite the high demand, the rising prices have led to a decline in gold consumption in 2025. According to the report by Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI, consumer demand for gold fell by about 16% year-on-year in Q3 2025, primarily due to a decrease in jewellery purchases.
The increase in gold prices has also resulted in a 9% drop in gold imports, totaling $26.5 billion during the April-September period of FY26, down from $29 billion in the same timeframe of FY25.
Dr. Ghosh noted an interesting trend: central banks are increasing their gold reserves. The RBI's gold reserves rose to 880 tonnes in 2025 as part of a strategic reserve management initiative.
When comparing returns, gold has performed similarly to the equity market (Sensex) over 5, 10, and 15 years, but it has significantly outperformed in the 1-year and 3-year periods.
The report also mentioned recent discoveries of new gold mines in various regions, including Deogarh, Keonjhar, and Mayurbhanj in Odisha, where the Geological Survey of India has detected an estimated 1,685 kg of gold ore. Additionally, Jabalpur in Madhya Pradesh and Kurnool district in Andhra Pradesh are expected to contribute significantly to gold production, potentially easing import pressures and benefiting the current account balance.
Since the government began issuing Sovereign Gold Bonds (SGBs) in November 2015, it has released 67 tranches, with the latest in February 2024. As of October 23, the outstanding SGBs total 125.3 tonnes. Considering the redemption price of Rs 12,704 for the 2017-18 Series IV, the total cost to the government amounts to Rs 1.59 lakh crore.
Taking into account the issuance of these units, the total cost to the government due to the increase in gold prices is estimated at Rs 93,284 crore.