Finance Minister Nirmala Sitharaman on Monday clarified in the Lok Sabha that India’s rising gold reserves, including those held by the Reserve Bank of India (RBI), is not intended to replace any international currency.
Photograph: Arnd Wiegmann/Reuters
She responded to Congress MP Manish Tiwari’s concerns about whether the global shift towards gold signaled a move away from the US dollar as a dominant settlement mechanism.
The finance minister said, “Gold is also kept in the Reserve Bank and gold is also being bought by the Reserve Bank.
“But beyond that, as regards an international currency or potential currency, there is not much for me to comment at this stage.”
Congress MP Tiwari stated that since the US abandoned the gold standard in 1971, gold had lost its significance as a major financial asset.
However, in recent years, central banks worldwide have increased their gold holdings.
From constituting only 6 per cent of global reserves in 2006, gold now makes up about 11 per cent in 2024.
Countries like China, India, Poland, and Turkey have been among the most aggressive buyers, and domestic gold prices in India have surged as well.
He asked “this shift away from the dollar to gold, does it indicate a renewed search for an alternative international settlement mechanism being cost the dollar?”
Responding to this, Sitharaman acknowledged that gold demand in India remains strong and has even grown.
She attributed this to the traditional preference of Indian households, small businesses, and women for gold as a secure and liquid investment.
“I think it is very typical of India, particularly for households of small businesses and, it is normally said, women, but general households also, and women also, to invest in gold because they think it’s far more secure and far more liquid,” she said.
Regarding the RBI’s gold purchases, she confirmed that the central bank is accumulating gold to maintain a balanced reserve portfolio.
While the US dollar has been a dominant component of India’s foreign exchange reserves, the RBI also holds reserves in other currencies and gold.
She stressed that the move is part of a strategy to diversify reserves rather than an indication of India shifting away from the dollar or pushing for an alternative international settlement mechanism.
The statement comes at a time when global discussions around de-dollarization have gained momentum, with some countries exploring alternatives for trade and reserves.
However, Sitharaman made it clear that India’s increased gold accumulation does not signal any such shift.
