Government Mulls Over Discontinuing Sovereign Gold Bond Scheme

In a surprising development, the Narendra Modi government is reportedly considering discontinuing the popular Sovereign Gold Bond (SGB) scheme. Sources close to the matter have revealed that a final decision on the fate of the scheme is expected to be made in September, coinciding with the Reserve Bank of India's borrowing meeting.

Introduced as an investment avenue rather than a social security net, the SGB scheme has faced increasing scrutiny for its financial implications. The government is said to view the scheme as an "expensive" tool for managing the fiscal deficit.

SGB: An Expensive Proposition

The SGB scheme has been a popular choice among investors seeking to hedge against inflation and rupee depreciation. By offering a fixed return in addition to the price appreciation of gold, it has attracted a substantial investor base. However, the government's perspective is that the costs associated with the scheme outweigh its benefits. ?

No Immediate Alternatives

While the decision to discontinue the SGB scheme is still under consideration, the government has not yet explored alternative avenues for mobilizing resources through gold-based instruments. The potential implications of such a move on the gold market and investor sentiment remain to be seen.

Key Takeaways

• The government is considering discontinuing the Sovereign Gold Bond scheme. ?
• The decision is likely to be linked to the RBI's borrowing meeting in September. ?
• The scheme is viewed as an expensive tool for financing the government deficit. ?
• No alternative gold-based instruments are currently under consideration.

The discontinuation of the SGB scheme could have far-reaching consequences for the gold market, investors, and the government's fiscal management. It will be crucial to monitor the situation closely as the September deadline approaches.

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