By Ramachandran Rajeev Kumar — 2026-05-13

The Gold Asymmetry: One Rule for the Sovereign, Another for the Citizen

At a Bharatiya Janata Party event in Hyderabad on 10 May, the Prime Minister made a request of Indian citizens. For at least one year, he said, they should avoid buying gold and avoid foreign travel. The reason offered was patriotic and macroeconomic in roughly equal proportions: the US-Iran disruption to oil supply is squeezing India's current account, the rupee is under pressure, and household gold-and-travel consumption is a contributor to the squeeze. Citizens, in short, were asked to defer two of their most common discretionary purchases for the national balance sheet.

Six days earlier, the Reserve Bank of India reported that its own gold holdings had climbed from 794.64 metric tonnes in September 2025 to 880.52 metric tonnes by March 2026. The share of gold in India's total foreign exchange reserves rose from 13.92 percent to 16.70 percent in the same six-month window. The Reserve Bank, in plain English, was doing exactly what the Prime Minister told citizens not to do. It was buying gold. At pace.

The two messages, placed side by side, do not reconcile. The reconciliation attempts that have appeared in the supportive press are not convincing. The asymmetry is real, and pretending otherwise is bad for trust at a moment when the country needs trust the most.

Why the central bank is buying

The sovereign case for accumulating gold is sound and well-rehearsed. Gold is a non-credit-risk reserve asset. It does not depend on any other government's good behaviour. It does not lose value when the dollar weakens. It is liquid in volume. It is portable politically: it can be held domestically, repatriated quickly, and used as collateral in extreme conditions. Central banks across the world -- China, Russia, Turkey, India, much of Eastern Europe -- have been adding gold for the last decade for exactly these reasons. The shift accelerated after the 2022 freezing of Russian dollar reserves made the political risk of holding only fiat assets impossible to ignore.

India's accumulation pace, taken in this context, is rational. Eighty-six tonnes added in six months is the act of a country quietly preparing for a world in which the dollar-denominated rules-based order may not be the only game. The current 16.70 percent gold share is still modest by the standards of the major Western European central banks -- the Bundesbank in Germany holds gold at about 74 percent of its reserves, the Banca d'Italia at about 69 percent, the Banque de France in similar territory. India is not at the leading edge. It is catching up.

There is nothing wrong with this. The wrongness arrives only when the same government, through its political leader, asks citizens to abstain from the exact behaviour the sovereign is engaged in.

Why the citizen buys gold

The Indian household case for owning gold is also sound, and it is older than any central-bank case by several thousand years. For the median Indian family, gold is the most accessible form of inflation-hedged wealth available. Bank deposits lose purchasing power in any year that consumer-price inflation exceeds the post-tax deposit rate, which is most years. Equities require literacy, an account, a tolerance for volatility, and a willingness to trust intermediaries that the majority of households do not have. Real estate requires capital scale and a transaction infrastructure that excludes the lower half of the income distribution. Gold requires none of these. It is bought from a trusted local jeweller. It is stored at home or in a small locker. It is converted to cash, with frictions, at the same jeweller when the family needs it.

For an Indian family in the third, fourth, or fifth decile of the income distribution, gold is not jewellery. It is the household's reserve currency. It is the daughter's college fund if the regular savings do not stretch. It is the medical-emergency buffer when the public hospital queue is six weeks. It is the working-capital cushion for the family business when the next monsoon disrupts cash flow.

The Prime Minister's request, taken at face value, asks these households to dismantle their own reserve discipline for one year. The Reserve Bank, in the same window, is expanding its reserve discipline. The asymmetry is not in the politicians' favour.

The reconciliation attempts

Three reconciliations have been offered.

The first is that household gold imports are a current-account drag in a way that central-bank gold accumulation is not. This is true in accounting terms. The Reserve Bank's gold purchases are largely funded from existing reserves or from domestic mining sources, not from incremental import demand at the margin. Household gold demand, by contrast, is satisfied largely through imports, which directly add to the trade deficit. The technical case is correct.

But the technical case proves too much. If the country can afford to add eighty-six tonnes to sovereign reserves in six months, the country can afford to import a roughly similar volume for household reserves. The marginal current-account pressure from doing both is manageable. The state could, if it chose, allow households the same hedge by relaxing import duties on small-denomination bullion bars for retail purchase, or by expanding the sovereign gold-bond programme aggressively enough that households can hedge in financial form rather than physical form. Neither has been done at scale.

The second reconciliation is that household gold buying is "unproductive" in a way that sovereign reserves are not. This argument has been recycled by Indian finance ministries for sixty years. It is empirically weak. Household gold is collateral for an active loan-against-gold market with outstandings of roughly six to seven lakh crore rupees, growing at well above twenty percent a year, that injects working capital into the economy through banks and non-bank lenders. The gold sitting in lockers is not idle. It is leveraged.

The third reconciliation is that the Prime Minister's appeal was symbolic, and that no one will actually defer gold purchases by twelve months. This is probably true. Indian household gold demand has fallen and risen with prices, with marriage seasons, and with monsoon outcomes, but it has never moved meaningfully in response to political appeals. If the appeal is symbolic, however, it is symbolic in the wrong direction. The symbolism is that the sovereign is signalling: do as I say, not as I do.

The cost of asymmetric burden-sharing

The damage from the asymmetry is not the gold flows. The gold flows will be what the gold flows will be. The damage is to the implicit social contract that allows the state to ask citizens for sacrifice in difficult periods.

Indian citizens have, historically, been willing to absorb extraordinary burdens when the state asked. The voluntary surrender of household gold during the 1962 war is part of the country's economic folklore. The acceptance of demonetisation in 2016, whatever its eventual macroeconomic verdict, was a remarkable display of public patience. The willingness to absorb the first months of the 2020 lockdown was substantially greater than most observers expected.

In every case, the citizen patience held because the state was visibly bearing its share of the burden. The asymmetry undermines that pattern. If the sovereign is hedging while asking the citizen not to, the citizen learns a different lesson for the next round.

The honest version of the request

The honest version of the Hyderabad appeal would have been straightforward. The Reserve Bank is accumulating gold because the global environment requires reserve diversification. Indian households are encouraged to do the same, with their own discipline, and the government will reduce the import-duty wedge on small-denomination retail gold to make it easier. Foreign travel, which directly drains current-account capacity through outbound tourism remittances, is the genuine ask for deferral. The two behaviours are different, and the request can be different.

A citizen will accept a hedge from a sovereign that is also hedging. A citizen will resent a sovereign that demands they unhedge while it does the opposite.

The Reserve Bank is right to buy gold. The Prime Minister is right to ask citizens to defer foreign travel. Both can be true at the same time. What does not work is asking citizens to abandon the same hedge the state is building, on the same week.

The reconciliation is available. It just has not been offered.

The author is the founder of nBookMedia and writes on national strategy, economic policy and the Indian growth story.