Government Surrenders to India’s Gold Addiction
For 10 Years Indian Government tried to curb Gold Imports but has finally given up.
India imports over 700 tons of gold annually, draining more than ₹3.5 lakh crore in foreign exchange. To reduce this dependence, the government launched ambitious schemes a decade ago. But after ten years, the gold obsession remains intact.
The Gold Monetization Scheme (GMS) has been discontinued, and no new Sovereign Gold Bonds (SGBs) have been issued this year.
The 2015 Gold Strategy
PM Narendra Modi introduced three gold-related schemes in 2015:
1. Gold Monetization Scheme (GMS):
• Deposit gold in banks and earn 2.5% annual interest.
• At maturity, get back gold—not as jewelry, but as gold bars.
• Banks loaned this gold to jewelers to reduce imports.
• The expectation: Even if 5% of India’s estimated 20,000-ton gold holdings were deposited, it could significantly reduce annual imports.
• The reality: In ten years, only 31 tons were deposited.
• Why it failed: Indians don’t want their gold melted—jewelry is more than just an asset.
• Outcome: The government shut down the long-term (12-15 years) and medium-term (5-7 years) deposit options on March 26. Banks will decide the fate of short-term (1-3 years) deposits.
2. Sovereign Gold Bond (SGB):
• Encouraged buying paper gold instead of physical gold.
• Investors received interest + market value of gold at maturity.
• The government thought it was a smart move—raising funds at 2.5% interest, much cheaper than the 8-9% market rate.
• The problem: Gold prices tripled—from ₹25,000 (2015) to ₹90,000 (2025) per 10 grams.
• The result: The government now faces a ₹1.12 lakh crore payout to bondholders by 2032.
• Outcome: New bond issuances have stopped this year.
3. Indian Gold Coins:
• The government minted and sold gold coins sourced from the Gold Monetization Scheme.
• Outcome: The scheme failed due to low demand.
The Bottom Line
Despite multiple efforts, gold imports remain high, and none of these schemes made a dent in India’s gold obsession.
The core issue? Indians see gold as a safe investment—historically performing as well as or better than the stock market. The government underestimated this deep-rooted belief, and in the end, it had to give up.