Gold has held mythological, religious, economic and cultural significance in India for millennia. Yet, the country remains heavily dependent on imports, with domestic production minuscule compared with demand.

Following the liberalisation of gold imports in the mid-1990s and the introduction of futures trading in the mid-2000s, imports surged. From $4.1 billion in 2001, they more than doubled to $10.7 billion by 2006. The upward trajectory has continued, with import value rising from $35 billion in 2015 to a record $72 billion in 2025.

The government's concern over India's appetite for gold is understandable. The Prime Minister has even appealed to people to curb their purchases. Yet, despite importing 700-900 tonnes annually, often estimated at 20-25% of global trade, India remains a price-taker. Global benchmarks are set in London and New York, while India's trade and tariff policies have limited influence over international prices.

India appears to have mistaken its enormous import volumes for pricing power. But trading volumes alone do not make a market a price-setter. They may be necessary, but are hardly sufficient.

That requires predictable policies, a transparent physical market, effective curbs on the grey market, reliable quality assurance and hallmarking, strong infrastructure and integration with global value chains. Policymakers have paid inadequate attention to these fundamentals.

Shifting Ground
Three developments are now reshaping the global gold market, and India cannot afford to ignore them.

China's ambitions: China is a major gold producer and importer, often importing as much as India. It is sceptical of Western narratives and data on gold reserves, including the roughly 8,000 tonnes reportedly held by the US at Fort Knox, whose physical verification remains contentious.

China wants its own price-discovery mechanism rather than dependence on London and New York. It is building reserves, with officially disclosed holdings estimated at 2,450 tonnes. At some point, it may slow accumulation and seek to establish an alternative benchmark, challenging Western dominance in global price discovery.

Gold relocation: Sanctions against Russia and recent geopolitical and trade disruptions have made countries increasingly wary of holding gold abroad. Central banks want direct control over reserves, particularly during crises when access to overseas holdings may become uncertain.

Some are repatriating gold, while others are shifting it to jurisdictions they consider safer. France has brought US-held gold back to Paris, Serbia plans to keep its bullion domestically, and the Netherlands is increasing its holdings in London for easier market access. Venezuela's $4 billion in gold held in London has also become a political flashpoint.

The trend reflects declining geopolitical trust. Gold offers protection only if it can be accessed when needed.

Singapore's opening: Singapore is positioning itself as an international gold trading hub as Asian central banks seek to diversify reserves and store physical gold closer to home.

Its strong governance framework and sovereign vault, with a capacity of 500 tonnes and scope for expansion, support that ambition. Several central bankers have reportedly expressed interest in storing gold there. London and New York remain preferred locations because of their deep, liquid markets, but Singapore hopes to join their ranks.

India, meanwhile, holds an estimated 30,000 tonnes of gold domestically. Leveraging this enormous stock will require political will and consistent policies that build confidence across the value chain.

Three measures could help mobilise this largely unproductive wealth.

Electronic Gold Receipts: EGRs are a welcome initiative. Notified as securities under the Securities Contracts (Regulation) Act, 1956, in 2021, they allow physical gold to be deposited, converted into dematerialised receipts and traded in a regulated market.

EGRs can also be pledged to raise funds or transferred to settle obligations, and surrendered in exchange for physical gold. Backed by 100% physical gold, they offer the potential for transparent, standardised pricing and a more integrated national market.

Temples and other institutions holding large quantities of idle gold should be encouraged to participate. Family offices, gold loan companies and bullion dealers could also become important participants.

Gold Monetisation: The Gold Monetisation Scheme (GMS) has attracted a lukewarm response. Households remain wary of depositing gold with banks, partly because of fears that the source or the funds used to acquire it could invite scrutiny.

The scheme needs credible assurances against retrospective investigation of legitimate holdings, potentially through an amnesty framework. A nationwide campaign explaining its benefits could help rebuild trust. Banks could then use pooled gold to provide metal loans to jewellers, reducing their dependence on imports.

Investment Demand: India must distinguish between investment and consumption demand. A substantial share of gold imports, particularly bars, serves investment or speculative purposes rather than jewellery consumption. High prices have weakened jewellery demand, with buyers shifting towards lighter pieces and lower caratage, including 8-carat and 14-carat gold.

End-to-end traceability of imports, from the source of funds to their eventual disposal, would help establish how much gold is being bought for investment and how much for consumption. This would allow policymakers to frame more targeted policies for each category.

India's enormous gold holdings and appetite for imports have not given it a meaningful voice in global price discovery. That will not change simply by trading more or accumulating larger reserves. Becoming a credible international gold hub requires trust, transparency, predictable regulation and market infrastructure. Without these foundations, India's ambition to become a price-setter will remain elusive.