RBI sells gold for first time in 30 years to plug revenue shortfall

To plug the Narendra Modi government’s revenue deficit, the Reserve Bank of India (RBI) has turned to selling gold from its reserves for the first time in 30 years. Following the recommendations of the committee headed by Bimal Jalan, RBI has ended up selling $1.15 billion worth of gold till now. It has also bought gold worth $5.1 billion since July, 2019.

RBI had 1.987 million ounces of gold till August. Gold valued at $26.7 billion was held in the Forex Reserve as on October 11.

The Bimal Jalan-led committee's advice involves not sharing the valuation gain in gold with the government but sharing profits with the government from trading in the precious metal. The Jalan committee was constituted in 2019 to look into ways RBI could step in to plug the government’s revenue shortfall. Incidentally, the Jalan Committee had also recommended transfer of the RBI’s surplus to the Centre, following which Rs 1.76 lakh crore was transferred to the Modi government.

Communist Party of India leader, Sitaram Yechury tweeted, “ Modi government going bankrupt? Selling people’s wealth to meet its profligacy and for its propaganda, spin and spreading of untruths.”