Not just a piece of paper.

"The rupee declined 10.8% in FY26 since the closing levels of last fiscal year - recording the worst performance since FY12. Much of this decline came during the pre-war period, even when the dollar was weakening, and other currencies were gaining," wrote Payal Bhattacharya. "India's close to $700bn in foreign exchange reserves will not run out because of higher imports. The only way reserves get depleted is if RBI decides to sell foreign exchange reserves to support the rupee." A weaker rupee is good. "A depreciation raises the cost of imported goods and overseas travel in rupee terms, encouraging households and firms to to economise on precisely those expenditures that strain the balance of payments. In doing so, it delivers - more effectively and more durably - the shift towards domestic spending that voluntary restraint seeks to achieve," Prof Gita Gopinath. India is losing foreign exchange as foreign institutional investors (FIIs) are selling Indian stocks. "FIIs have been net sellers in 13 out of the past 20 months." In 2025, FIIs sold Rs 1.66 trillion in equities and bought Rs 947 billion of debt. But, "Since the US-Israel war with Iran began at the end of February, FIIs have sold Rs 2.03 trillion in equities and also pulled out Rs 125.12 billion from debt." Domestic institutional investors (DIIs) have been buying as FIIs have sold out. DIIs now hold 19.24% of the NSE-listed companies while FIIs hold 16.13%. In December 2020, FIIs held 21.16% while DIIs held 13.58%, wrote Sreedev Kanyakumar. Buying by domestic investors prevents any significant fall in share prices, limiting losses of foreign investors and repatriation of more foreign exchange. Since Sanjay Malhotra took over a Governor of the Reserve Bank of India (RBI) in December 2024, the RBI has slashed its interest rate by 125 basis points (bps) and also pumped nearly Rs 20 trillion into banks to bring down borrowing costs. "Yet, the funds simply leaked out of India's banking system as global money managers dumped local assets and took dollars home," wrote Andy Mukherjee. The RBI has been buying up government debt and "the amount of government paper (including treasury bills) held as on 28 February was Rs 21.34 trillion. It was Rs 15.58 trillion in March 2025." "Starting from automatic monetization, under which 4.6% of treasury bills were once issued by the government to RBI for funding the deficit," "In the 90s, we shifted to the market becoming the sole point of contact for the government." "However, with frequent OMOs (open market operations) in recent times, there has been a tendency for that debt to be transferred to RBI and held by it," wrote Madan Sabnavis. There has also been an "extraordinary rise in RBI's surplus transfers to the Union government. In 2023-24, it transferred Rs 2.11 trillion, which was 7.6% of the Centre's overall revenue receipts. The transfer for 2025-26 may be even larger than last year's record Rs 2.69 trillion." The International Monetary Fund (IMF) has warned of "quasi-fiscal" support by the RBI, wrote Ajit Ranade. The rupee has fallen not just against the US dollar but by nearly 12% against the Pakistani rupee and by 10% against the Bangladesh Taka. ET. The steep depreciation in the rupee is unfair because India has a low current account deficit, low external debt and is bringing down its fiscal deficit. India has also received a credit rating upgrade from three institutions. It is because of the flood of investment into artificial intelligence (AI) companies drawing funds away from emerging market economies, regardless of fundamentals, wrote Chief Economic Advisor V Ananatha Nageswaran. Theoretically, a central bank cannot go broke because it can print currency (ET), but printing currency makes it weaker, and if the currency keeps losing value, the wealth of the people and the country will become worthless. India may not be bankrupt but its citizens will feel like that. The rupee is not just a piece of paper. It is food, medicines, rent, education and travel for us. Say no to fiscal support. It's suicide.    

Free but expensive.

"Nitin Gadkari, the Minister of Road Transport and Highways in India, has urged a strong initiative towards achieving 100% ethanol fuel usage in the country in the near future." "E100 refers to a high-ethanol fuel blend that is primarily or nearly pure ethanol by volume." NDTV. Ethanol is produced from sugarcane, rice and maize. "Roughly 10,790 liters (of water) go into producing one liter of ethanol from rice, compared with about 3,630 liters for sugarcane and 2,570 liters for maize." Also, "Nearly 60% of maize is rain-fed, while sugarcane and rice depend heavily on irrigation." However, the rice has already been produced so it may be better to use it for ethanol rather than letting it go to waste. While ethanol will save foreign exchange by reducing crude oil imports, we may have to import more pulses and oilseeds as farmers divert land to growing maize. Since ethanol produces less energy than petrol, consumers will have to buy more of it, and it produces acetaldehyde and formaldehyde which are toxic. NDTV. "Ethanol burns faster than petrol, delivers about 34% less energy per unit, and is corrosive because it absorbs water. Brazil's flex-fuel vehicles (FFVs), re-engineered to run on ethanol, are built to counter these drawbacks and reassure buyers." The Indian government has reassured car owners of ethanol's safety but no one believes them. Earlier claims that ethanol will be cheaper were wrong. "By govt's own admission, procuring ethanol is now more expensive than refined petroleum - a situation that will only worsen as our fuel needs grow," wrote Anjana Menon. To save on fossil fuels and reduce pollution India has been investing in renewable energy. As a result, "Power prices on exchanges have slumped to zero in multiple trading sessions, despite an expected surge in summer electricity demand," because "India's installed solar capacity has risen to 154.23 GW, but battery and energy storage capacity has not kept pace." Mint. Power distribution networks within states are patchy. "Non-fossil sources already account for nearly half of installed capacity, with over 250 GW deployed, yet contribute only about a quarter of actual power generation." And so, "Between May and December, 2.3 terawatt-hours of solar power was curtailed. In Rajasthan, curtailment has reached 50%, with 3.3 GW lying idle." HT. "India is scrambling to solve a growing clean-energy paradox: the country is adding renewable power at record pace, but lacks the storage capacity needed to to use that energy when the sun sets and wind generation drops." The Union government is planning support for long-duration energy storage (LDES) which can supply power for over eight hours instead of battery energy storage systems (BESS) which can supply up to four hours. The plan was for 47 GWh of LDES by FY 27 but only 795 megawatt hours (MWh) of BESS has been installed so far. Mint. The government wants people to use public transport to save on petrol. Since 2014, the government "has splashed out nearly $26bn on building metro connectivity across nearly two dozen Indian cities. The network has grown fourfold from under 300km to more than 1,000km by 2025." Average daily ridership has jumped from three million to 11 million. But, "An Indian Institute of Technology Delhi report from 2023 showed ridership of merely 25-35% of the projected figures across corridors." BBC. Renewable energy is not cheap because we need a parallel system based on fossil fuels when the sun sets and the wind drops. "Ask families in Germany and the UK what happens when more supposedly cheap solar and wind power is added to the national mix, and they will tell you by looking at their utility bills: power gets far more expensive," wrote Bjorn Lomborg. "Poor countries are especially hurt by false claims of cheap green energy." Having pocketed over Rs 40 trillion from extortionate taxes on cheap crude oil since 2015 (ppac.gov.in), the government is now in extreme panic. If they cut taxes the fiscal deficit will balloon while increasing prices will cause inflation and public anger. So they are increasing prices by small amounts, first by Rs 3 and then by Rs 0.90. (TOI), hoping people will not notice or shrug off small increases if they did. Masters of duplicity. Diabolical.   

It's 60+3.

"India's services exports touched $421.3 billion in FY26, surpassing $418.3 billion estimated earlier, boosting total goods and services exports to a record $863.1 billion last fiscal year, an official said." "Merchandise exports grew 0.93% in FY26 to $441.78 billion from $437.7 billion in FY25." ET. This glowing report of our export growth omits to report on our imports, and hence, our trade balance. Our combined (services + merchandise) trade resulted in an estimated deficit of -$119.30 billion in FY26, compared to -$94.66 billion last year. pib.gov.in. "India's merchandise trade deficit widened to $28.38 billion in April," compared to $20.67 billion in March. Merchandise exports rose to $43.56 billion in April from $38.92 billion in March, while imports jumped from $59.59 billion in March to $71.94 billion in April. Estimated services exports stood at $37.24 billion and imports at $16.66 billion. ET. "India's trade deficit is likely to remain under pressure in the coming months as elevated crude prices, supply-side disruptions and potential global demand slowdown weighed on exports, according to Nuvama Institutional Equities." Rupee depreciation could increase competitiveness and the increased duty on gold will provide some short-term relief. Electronics deficit jumped from $0.7 billion to $7.6 billion. ET. Not just gold, petrol and diesel prices were also increased by Rs 3 per liter, while the price of CNG, used by all public transport in Delhi by law, was increased by Rs 2. TOI. This was apparently necessary because, "Amid high oil prices. state-run oil marketing companies (OMCs) are losing Rs 20 per liter on the sale of petrol and around Rs 100 on diesel sale, said Sujata Sharma, joint secretary, Ministry of Petroleum and Natural Gas." "On 27 March, the finance ministry reduced the excise duty on petrol and diesel by Rs 10 per liter." So this is an increase of just 4%. Mint. We should be pleased because the price of fuel has gone up only 3.2-3.4% in India it has gone up by 44.5-48.1% in the US, 23.8-50.6% in Vietnam and 15.4-19.8% in Italy. MC. Are we so lucky, or is this just another example of our 'Godi (lapdog) Media' (wikipedia)? "A widely -shared chart posted by many pro-government journalists on social media highlights that India's recent fuel hike was as low as 3%, while countries like the US, UAE and Canada saw spikes ranging from 30% to 80%." This is due to Base Effect, because India's retail prices of fuel were very high compared to other countries when crude prices were low. Comparing retail prices in 2016 with today's, prices in India have jumped by 63%, in Vietnam by 60%, in the US by 36% and in Italy by 34%. That is because Prime Minister Narendra Modi has been taxing fuel without restraint. Taxes comprised Rs 46 out of the retail price of Rs 64 per liter in 2016, Rs 60 out of Rs 80 in 2020 and Rs 62 out of Rs 95 per liter in 2021. The Wire. Increasing the price of fuel will increase transport costs of all goods and services. "India's retail inflation quickened to 3.48% in April, driven by dearer food prices, government data showed." Reuters. So, they must be hoping that it will remain within the government target of 4% +/- 2% on either side  (Reuters). It is not just high prices but also the rupee which has dropped to 96.30 to one dollar this morning (xe.com). This will increase the cost of all imports and, since higher prices mean a lower value of the rupee, as prices rise the rupee will fall even further. The only solution may be to increase interest rates by a hefty amount, say 100 basis points. That will reduce consumption, and support the rupee by increasing 'carry trade' in which traders borrow currencies with lower returns and invest in one which gives higher returns (Investipedia). It will increase returns for savers.But, it may also cause a severe recession and a fall in share prices. And so, will need guts and character. Not for weasels.        

Another in a long list.

"First came the corona(virus) pandemic; then wars began to break out, and now there is an energy crisis. The decade is turning into a decade of disasters for the world," Prime Minister Narendra Modi said in the Netherlands," (HT) where he was speaking to the Indian diaspora during his latest foreign tour. It is easy to blame everything on global events when our problems were created by how the government responded to those events. "On 25 March 2020, when India had reported only 500 cases, the country went into what was one of the strictest lockdowns in the world. This first set of curbs remained in place till 14 April and was extended four times, each time with gradual relaxations." HT. As a consequence, "India's economy suffered its worst slump on record in April-June, with the gross domestic product (GDP) contracting by 23.9% as the coronavirus related lockdowns weighed on the already-declining consumer demand and investment." TNIE. And yet, when so many millions were dying of Covid in 2021 that crematoriums had to create pyres in car parks (BBC), there was no lockdown. In May 2021, "India's holiest river the Ganges, has been swollen with bodies in recent days." BBC. Consumer demand and investments were declining because of an ill-considered demonetisation of Rs 1000 and 500 banknotes on 8 November 2016 with just 4 hours notice (wikipedia) so the GDP growth rate fell from 8.3% in 2016 to 6.8% in 2017, 6.5% in 2018 and a dismal 3.9% in 2019, the last full financial year before the Covid pandemic struck (worldometer). One theory was that it was designed to hamper the campaigning ability of opposition parties before the assembly election in UP which the BJP won in a landslide with 312 seats out of a total of 403 (elections. in). The medium, small and micro enterprises (MSME) which operate mainly in cash, constitute 45% of the country's output and employ 60 million people, were badly hit. ET. The Reserve Bank of India (RBI) played an active part by choosing masterly inactivity when retail inflation was at a scorching 6-7% (RI) well above the government mandate of 4% with a margin of 2% on either side (ET). The RBI cut its "short-term lending rate on 22 May 2020, in an off-policy cycle to perk up demand by cutting the interest rate to a historic low." It kept the rate unchanged 11 times at 4% till April 2022. zeebiz. com. Retail inflation was at 6.28% in May 2020 when it took its disastrous decision. Rising prices mean a falling value of the rupee. The rupee was at 70.96 against one dollar in January 2020 but had fallen to 73.78 by December. Thomas Cook. The rupee is flirting with 96 to one dollar this morning. xe.com. Mr Modi has asked people for austerity, telling them to work from home, to use public transport, not to buy gold and not to use cooking oil. ET. A report by Brickwork Ratings said that austerity could save $37.8 billion for the government. "The report argues that voluntary demand reduction across fuel, gold and fertilisers may offer the government fiscal breathing room at a time when its ability to absorb oil prices pass-through is thinning." ET. But, could this be another blunder on the part of this disaster-prone government? "Austerity programs employed after the 2008 financial crisis in Greece, Italy and other European countries led to long recessions in many of these countries. Similar experience was reported by Latin American countries that went for austerity after the commodity price collapse of 2014-15 fared poorly too," wrote Prof Himanshu. Is Mr Modi preparing Indians for a depression, with spiking inflation and a collapsing rupee by blaming everyone else and relying on his zombie Bhakts living in an alternate reality (DH) to swallow his bluff as they have been doing all these years? The end could really be nigh. For Indians.

Deficit will drown surplus.

"Moody's Ratings...slashed India's GDP growth forecast for the year by 0.8% to 6% on subdued private consumption, capital formation and industrial activity amid higher energy costs." "For calendar year 2027, Moody's slashed GDP growth estimates by 0.5% to 6% for India." ET.  Already, "Petrol and diesel prices were hiked by Rs 3 per liter yesterday after state run oil companies faced mounting losses due to a sharp rise in global crude oil prices." "India's retail inflation rose marginally to 3.8% in April, driven by dearer food prices, government data showed." "Annual inflation remains below the central bank's 4% target," as "Food inflation was at 4.2% in April, compared with 3.87% in March." Reuters. However, "India's wholesale inflation unexpectedly accelerated to 8.3% in April, its fastest pace in three-and-a-half years, as surging energy costs triggered by the Middle East conflict pushed up fuel and manufacturing prices across the economy, government data showed." ET. Wholesale prices will feed into retail prices with a lag. But, oil prices are not surging that much. Brent crude is at $109.3 per barrel this morning. oilprice.com. It was much higher in 2008, 2011-14, and 2022-24. eia.gov. What has really changed is the Indian rupee, which has crashed. It was about 49 to one dollar in 2008, at 55-60 per dollar from 2011-14 and at 81-83 to one dollar from 2022-24. Thomas Cook. One dollar buys Rs 95.99 this morning. xe.com. This is not wholly because of the Iran conflict, the rupee has been falling for some time. That is because the RBI has been printing money to finance government spending. "The Reserve Bank of India (RBI) balance sheet shows that the amount of government paper (including treasury bills) held as on 28 February was Rs 21.34 trillion. It was Rs 15.58 trillion in March 2025." "The increase so far of Rs 5.76 trillion in RBI holdings of government paper is remarkable. An increase of this scale has never been witnessed earlier," wrote Madan Sabnavis. It means that the RBI is buying up government debt by printing rupees, or financing its deficit, as was the practice earlier. "As part of the 1991 reforms, the government and RBI decided to stop this financing arrangement." "In 1997, the government and RBI signed an agreement that stopped this practice of deficit financing." The India Forum. This year's budget estimates the deficit between government revenue and spending to be Rs 15.69 trillion. prs.india.org. Is that a gross underestimate? The Asian Development Bank reports that "The Union government spent Rs 6.33 trillion on subsidies and transfers in 2023-24," but "the official figures undercount actual subsidy expenditure by about Rs 3 trillion at the state level alone; dozens of schemes, pensions, loan wavers, investment promotion subsidies and electricity shortfalls are simply not classified as subsidies," wrote Aditya Sinha. Every year the RBI transfers its surplus to the government. In recent years it has been transferring record amounts. It transferred Rs 1.02 trillion in 2023-24 and Rs 2.11 trillion 2024-25. panplexa.com. Last year it paid another record of Rs 2.69 trillion. HDFC. This year the government expects Rs 3.16 trillion, another record. ET. It is hard to believe that the RBI is making so much profits every year. However, it has the authority to print as many rupees it requires. Foreigners are not waiting. "Net outflow by foreign portfolio investors (FPIs) from the stock market for the current year crossed the Rs 2-trillion mark for the first time ever." TOI. As they repatriate in foreign currency the rupee falls in value. To protect the rupee, the RBI has been selling dollars in the spot market as well as in the unseen non-deliverable forward (NDF) market. "The RBI's short dollar book is close to $100 billion across offshore and onshore markets. A bulk of it is in the NDF market, where the central bank has ramped up its intervention in the last few weeks." Linked.in. Appointing obedient officials to help in raiding the central bank may look easy but there will be a price to pay. At some point the RBI will run short. And the rupee will collapse. What then?

Too many friends.

"Prime Minister Shehbaz Sharif has said that Pakistan is now recognized as a 'responsible' nation that not only knows how to defend itself, but has also emerged as a 'guarantor of global peace and security." "He also warned that any aggression against Pakistan would receive an 'immediate, befitting and full-spectrum response'." "He said Islamabad's role as a key mediator during the US-Iran conflict and its efforts to seek an end to violence have earned worldwide acknowledgement." DH. "Pakistan is in a unique position as it is trusted by the US, Iran and the Gulf countries." Also Field Marshall Asim Munir is President Donald Trump's "favorite field marshall". BBC. On 17 September 2025, Pakistan signed a Strategic Mutual Defence Agreement (SMDA) with Saudi Arabia which commits "treating any act of aggression against one as an act against both (known as collective security". wikipedia. This means that Pakistan could face "a potential 'nightmare scenario' if negotiations collapse, and it gets dragged into fighting with its neighbor Iran" in support of the Saudis. That scenario is not as fanciful as it sounds because, "Saudi Arabia carried out a series of unpublicised airstrikes on Iran in late March in retaliation for attacks inside the kingdom during the Middle East conflict, according to sources cited by Reuters. The strikes marked the first known case of Saudi Arabia directly conducting military action on Iranian soil." TOI. To pacify Iran, "Pakistan has opened six overland transit routes to move shipments into Iran, aiming to clear more than 3,000 containers stranded at Karachi and Port Qasim," out of which, "Spanning just 89 kilometers, the Gwadar-Gabd corridor has been activated as a key land route connecting Pakistan to Iran, cutting travel time to the border to just 2-3 hours compared to 16-18 hours from Karachi." oilprice.com. It may seem very easy but Gwadar is a port city in the Pakistani province of Balochistan and the China-Pakistan Economic Corridor (CPEC) connects Gwadar to the Chinese province of Xinjiang. wikipedia. A rebel group, the Balochistan Liberation Army (BLA), "accuses Pakistan's federal government of exploiting the rich mineral resources of its largest province without the local population benefiting. In February, "The BLA said it had launched a coordinated operation dubbed Herof, or 'black storm' against security forces, and claimed to have killed 84 members of the security forces and kidnapped a further 18." The claim was not verified. BBC. To the BLA the CPEC is another means of exploitation of their people and so they have repeatedly attacked Chinese nationals forcing the government to form a force of 12,000 soldiers to protect Chinese nationals in the country. wikipedia. In further help to Iran, "Pakistan, which was trying to play the role of a mediator by holding peace talks to end the US-Iran war, allowed several Iranian military aircraft to park on its airfields to shield them from American airstrikes, a report said." TOI. To get more friends, "Pakistan's Defence Minister Khwaja Asif, in an interview with Hum News.., indicated more progress towards formalizing a multilateral defence alliance among Muslim majority states, the so-called Islamic NATO." Pakistan and Saudi Arabia already have a defence pact and they are trying to get Qatar and Turkiye to join them. ET. In 2017 Saudi Arabia, UAE and Egypt severed diplomatic relations with Qatar, known as the New Arab Cold War (wikipedia) which were restored in 2021 after mediation by Kuwait and the US (BBC). Pakistan seems to be becoming everybody's friend. What if they start fighting among each other? Whose side will it take? Perhaps, our Prime Minister could help. He has toured almost every country. And, is doing it again.  

Eat less for the nation.

"India has raised import tariffs on gold and silver to 15% from 6%, government order said.., as part of efforts to curb overseas purchases of the metals and ease pressure on the country's foreign exchange reserves." Reuters. "The ongoing West Asia crisis is a 'live balance of payments stress test' for the country - directly impacting inflation, the exchange rate and the current account, chief economic advisor V Anantha Nageswaran said." "Nageswaran called India's exposure to the West Asian crisis structural and cautioned that the 'readings' are not of a temporary shock that will self-correct when the situation stabilizes." TOI. Why not? What is he not telling us? After all, in December 2025, "RBI Governor Sanjay Malhotra...characterised India's current macroeconomic moment as a 'rare Goldilocks period', that marks high economic growth and exceptionally low inflation."  DD News. Also, "India's foreign exchange reserves declined by 7.7 billion US dollars, standing at $690 billion for the week ending May 1." News on Air. Also, "The IGoM was informed that the country is secure, and there is no shortage of any petroleum product,..India has 60 days of crude oil, 60 days of Natural Gas and 45 days of LPG rolling stock," as per the Ministry of Defence press release." ET. If everything is hunky dory, as we Indians like to say, why is the CEA warning about a "live balance of payments stress test"? The last time we heard of a 'balance of payments' problem was in 1991, when we ended up pledging 67 tons of our gold to pay for our imports. wikipedia. Now, "As of September-end, out of total gold holdings of 880.8 tonnes, the RBI maintained 575.8 tonnes within India, while 290.3 tonnes remained in the custody of the Bank of England and Bank of International Settlements." TOI. We don't have to airlift any gold, it's already there. How convenient. So, what are they not telling us? The compound annual growth rate (CAGR) of the Real GDP was above 12% since 2004, 6.2% (2014-2026) and below 5.5% (2019-2026). "GDP calculation revision with a new base year (2022-23) has revealed that earlier estimates (base year 2011-12) had overstated GDP." "Net Foreign Direct Investment (FDI) has turned negative, reflecting diminished investor confidence." Vajiram & Ravi. "Since the beginning of the war, the Reserve Bank of India (RBI) has burnt nearly $38 billion in forex reserves, leading to a decline in import cover to 10.6 months from 11.3 months before the start of the war. Moreover, the RBI built up its gold reserves over the past year, and they now account for about 16% of total reserves. Excluding these, the import cover drops by about two months."  Mint. That means 8.6 months. In 2008, the subprime crisis affected the global economy with banking and trade severely affected (wikipedia) and the price of oil spiked to $128.08 per barrel in July (eia.gov) but we did not hear such alarming warnings. In 2024, India received $138 billion of inward remittance. Mint. As financial pressures build up all over the world, these might fall and the current account deficit would increase. Prime Minister Narendra Modi has asked people to decrease the use of petrol, not to purchase gold and to use less cooking oil and India could borrow foreign exchange from Indian expatriates. Reuters. If Indians cut down on food they will need less cooking oil as well as less gas. That is double saving. Ingenious.    

Trust is gold.

"The central government has raised customs duties on imports of precious metals, including gold and silver from 6% to 15%, just days after Prime Minister Narendra Modi urged people to adopt austerity measures such as deferring decisions to buy gold by one year to save precious foreign exchange." HT. As an unintended consequence, "Indian jewellery market is seeing a surge in gold purchases, with sales up 15-20% after PM Modi asked people to delay gold spending." Customers are rushing to buy bridal jewellery due to fears of higher import duties or GST changes." Whalesbook. The rise in taxes on gold is great news for smugglers. In 2025, "Gold smuggling into India has spiked ahead of key festivals," although, "Smuggling of gold into the world's second biggest buyer of the precious metal had fallen after the government slashed import taxes on it to 6% from 15% last year." As "Gold prices in India hit a record Rs 128,395 per 10 grams," "smuggling a kilogram of gold is very lucrative for grey market operators, with margins exceeding Rs 1.15 million from dodging the 6% import duty and a 3% local sales tax." The margin had fallen to Rs 630,000 per kg after duty reduction. "In the 2024/25 fiscal year ended in March, government agencies registered  3,005 cases of gold smuggling and seized 2.6 metric tons of the metal." Reuters. Customs duty on gold is changed quite frequently. It was 4% in 2012, rose to 10% in 2013, then to 12.88% in 2019 and to 15% in 2022, before being slashed to 6% in 2024. primeinvestor.in. In 2015, the government introduced Sovereign Gold Bonds which were priced at the market value of 24 carat gold. This allowed Indians to invest in gold without actually buying the metal and since, this was priced in rupees, it saved foreign exchange for the government. wikipedia. However, by the time the bonds came up for redemption the price of gold had shot up, imposing a fiscal strain on finances and so customs duty was slashed to reduce the amount of payout. People perceived this as a loss due to price fixing. Indians buy gold as a hedge against government policy. Average consumer price index (CPI) inflation in India has been above 5% in most years since 2014 (rateinflation.com) , whereas it was below 2% in the US, rising to 4.7% in 2021, 8.0% in 2022 and 4.1% in 2023, dropping to 2.6% in 2025. usinflationcalculator.com. The Reserve Bank of India (RBI) did not increase interest rate to bring down inflation rates since August 2018, increasing it by 40 basis points in an emergency meeting in May 2022. ET. As a consequence the rupee has fallen from 62 to the dollar in 2014 (bookmyforex.com) to over 95 rupees to one dollar today (xe.com). Indians are not allowed to invest in foreign currency, known as capital account convertibility (tatamutualfund.com) so they buy gold which is priced in dollars. People do not understand monetary and fiscal policies but they can feel that their money is being transferred to the government. They buy gold. Trust is gold.