India mops up third-highest amount in sovereign gold bond sales this April

The government of India sold sovereign gold bonds worth Rs 822 crore, during an issue that ended days before Akshaya Tritiya on 26 April. The amount of bonds sold was the third-highest ever during a gold bond sale, and the highest since September 2016.

Even the quantity of underlying gold pertaining to the bonds sold in April, at 1.77 tonnes, was the highest since July 2017, according to official data regarding the sale of sovereign gold bonds.

With jewellery shops remaining shut and online purchase of gold and jewellery not so popular, those with investible funds preferred this route. Last year, Akshaya Tritiya was in May, but the first Sovereign Gold Bond (SGB) issue was opened in June.

Gold exchange-traded funds (ETFs) were another avenue, but in comparison to sovereign gold bonds, they are less attractive. For example, there were Rs 194 crore in fresh inflows during March.

Data for April is yet to come. However, over 30 tonnes of gold was sold on Akshaya Tritiya last year. In contrast, hardly 10 per cent of that was estimated to have been sold on Akshaya Tritiya this year, including gold bonds.

Traditionally this is the wedding season on top of gold-buying festivals like Gudi Padwa and Akshay Tritiya. This year, however has been a complete washout for gold purchases on account of the lockdown.

SGBs were announced in November 2015 as a part of the plan to curtail gold imports, and give investors the opportunity to invest in the yellow metal and earn gold price returns without actually buying the metal in its physical form, therefore avoiding unnecessary imports.

Money raised by such bonds is considered market borrowing by the government. Besides price, investors also get 2.5 per cent interest on the invested money and capital gains tax exemptions, if held till the maturity of 8 years. For the first half of FY21, the first issue closed on April 24, two days before Akshaya Tritiya. The next issue opens on May 11. There will be a total of six issues during the first half of fiscal 2020-21 — one for each month — with the last issue opening on August 31 to mark Onam.

Shekhar Ghosh is a communications consultant and and former journalist, who has edited and written for publications such as like Business India, Business Standard, Business Today and Outlook.

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