Source: https://twitter.com/Nithin0dha/status/1707649385436450871?s=20
Why has SGBs as a share of gold imports increased so much?
Actually this is not entity accurate. Both SGB tranches are now closed but FY 24-25 is still has 6 months away so obviously the gold imports will increase especially with the festive season coming. Not exactly sure how much will be imported but we can go with atleast 50000 Crs more ig.
Though this year the investment into SGB is higher than last year (but in terms of value and when compared to gold imports of that year).
To answer your question I would say because people know are understanding the advantage of SGB as investment in recent years. I have to credit finfluncers here because they have made a lot of content about SGB and it’s advantages.
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“That’s money staying within the country and not going out. Much of the physical gold lying in vaults does nothing for the economy.”
Someone who understands mechanics can explain why SGD keeps money within India? Does this mean no gold is actually bought for every SGB sold?
Yes. SGB is NOT backed by actual gold. Just the sovereign guarantee (RBI).
I beleive that the author of the quote is asserting that folks who invested in SGBs,
would have otherwise invested in actual gold (if SGBs did not exist)
and that would have resulted in a weaker Indian economy due to…
a. Outward international remittances required to purchase / import gold.
b. Gold at rest, neither provides any services, nor stimulates the economy.
Before jumping to the conclusion that the author did,
something to keep in mind is that
if SGBs did NOT exist,
NOT every rupee that is currently invested in SGBs, would have been used to purchase / invest in gold.
The scale of the impact of SGBs in reducing the demand for gold (and hence on gold imports),
depends on what proportion of investment into SGBs would otherwise have gone into purchasing gold.
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Fully agree. SGB has attracted lot of additional investors to gold, who otherwise would not have invested in gold.
Personally, I don’t like gold as investment. But additional 2.5% interest and tax free gains make SGB interesting for me.
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