In times of furious debate on sovereign gold bonds in India (SGBS), AK Mandan, a financial planner and research analyst registered with SEBI, criticized the scheme, calling it as “fiasco” as demonization and making in India.
Taking X on Sunday, Mannhan argues that SGBS’s lack of design has led to an unsustainable increase in government liabilities, which are balloons by 930% in just six years, reaching £ 1.13 at the current gold prices.
“The poor design of SGBS has led to a 930% increase in government’s obligations in the last 6 years, which, at today’s gold price, stands at an incredible 1.13 lacquer,” Mandan wrote. He further warned: “And with every passing of gold, this will continue to inflate. And you know who pays for government commitments … “
Mannhan’s claims resonate a recent printing report that says the SGB has led to an incredible 930 percent increase in government liabilities by 2023-24. Obligations, the report said, have the potential to grow to the crown from 1.12 RS by 2032, going according to market estimates. He partially accused Fiasco of the design of the SGB scheme and partly for his own government activities, such as his increase in gold import duties by 15 % by July 2022.
What are SGBS?
Launched in 2015 as an alternative to physical investment in gold, SGBS allows individuals to invest in gold in the form of paper while earning 2.5% annual interest. The scheme was designed to reduce India’s import to imported gold, which reinforces the country’s trade balance. However, the government also guarantees that it will redeem these bonds at dominant market rates, which means its liabilities are increasing with each rise in gold prices.
The increased burden of government finances
Gold prices have increased significantly since the introduction of SGBS, crossing £ 64,000 to 10 grams in 2024 of around £ 26,000 in 2015. This increase has led to a large increase in government purchase costs. Since SGBS are supported by a sovereign guarantee, taxpayers eventually carry the burden of these liabilities.
Mandan’s tweet highlights this concern, attracting parallels with demonization and making in India, with many critics claiming to have failed to fulfill their promises.
However, while some economists and analysts on the market argue that SGBS provides a safe investment option and help prevent demand for physical gold, others agree that rising redemption costs may pose a long -term fiscal risk.
With gold prices expected to remain volatile in global economic uncertainties, the SGB debate is unlikely to fade any time soon. For the time being, as Mandan warns, “with every passing of gold prices, this will continue to inflate.”
