Gold imports may have fallen due to higher prices, however a look at the Reserve Bank- RBI of India’s annual report indicates that their gold holdings had risen in the financial year ending 31 March 2023. Imports dropped 24.2% to 35 tonnes, while their total holdings were 794.63 metric tonnes compared to 760.42 metric tonnes the previous year – thus signaling an increase of 34.21 metric tonnes over the year.
In its annual report for 2023, the RBI reports that 301.09 metric tonnes of gold were held as backing for currency notes it issued out of 794.63 metric tonnes on 31 March 2023. In the comparative period last year, the RBI held 295.82 metric tonnes of gold against currency notes. In March 2023, the RBI holdings 493.54 metric tonnes of gold as an asset of the Banking Department. In the previous financial year, the RBI held 464.60 metric tonnes.
As of March 31, 2023, the value of gold (including gold deposits) holding as an asset by the central bank’s RBI Banking Department increased by 17.20% from Rs 1,96,864.38 crore to Rs 2,30,733.95 crore. A total of 28.94 metric tonnes of gold were added to this figure, as well as an increase in the price of gold and a depreciation of the Indian rupee.
Impact on the balance sheet
RBI’s balance sheet enlarged in 2022-23, according to its annual report. On 31 March 2023, the size of the balance sheet was Rs 63,44,756.24 crore – having risen by Rs 1,54,453.97 crore (+2.50%) from Rs 61,90,302.27 crore in the previous year. The augmentation can be attributed to a surge in foreign investments, gold holdings and loans and advances by 2.31 per cent, 15.30 per cent and 38.33 per cent respectively.
Based on analysts’ analysis, the RBI has been able to pay a higher dividend to the government than expected due to a bumper income from forex sales and higher interest income on its foreign and domestic holdings. “The RBI’s annual report released today sheds light on why INR874bn (0.3% of GDP) dividends were transferred to the government versus INR350bn penciled in the FY24 budget,” says Nomura.
The RBI is experiencing a sharp rise in income because of its active foreign exchange intervention (INR1.0 trillion), according to the Japanese investment bank. In addition, higher interest income (INR1.3 trillion) on its holdings of domestic and foreign securities has more than offset losses on its liquidity operations.
Economists had previously forecasted that the Reserve Bank of India would present a dividend to India’s government of Rs 95,000 crore, which is 2.5 times higher than the Budget estimates. Despite this remarkably large infusion of capital, Nomura’s economists caution that there are too many components in play for them to be certain whether the fiscal deficit can still remain within 5.9% of GDP or not. They point out that factors such as nominal GDP growth, tax buoyancy, revenue collection and ambitious capex targets all contribute to these dynamics. Ultimately, they state that there is still a risk for slipping beyond the 5.9% target for FY24.
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