It could have posed as a model scheme to curtail gold imports. In order to stifle India’s appetite for gold, the government has introduced inflation index bonds. The first tranche amounting to around $364 million (R20 billion) is to be introduced on June 4.

Inflation Indexed Bonds (IIBs) are a new category of debt instruments to be introduced in India, where the coupon and principal amount would be linked to the rate of wholesale price inflation with a lag of four months. The authorities have said the objective of introducing such bonds is to channelise savings into productive sources of instruments from unproductive ones like gold.

Slowly but surely, there seems to be an anti-gold campaign that is at play in India. The concerted effort by the Indian government to discredit gold by imposing several curbs, and channelise consumers away from the precious metal, indicates a desperation that has not gone unnoticed by savvy investors.

“The government is making it too expensive for retailers to sell gold, especially when prices have hit new all-time lows. Retailers are forced to apply hefty mark-up given the new curbs,” said Manohar Kedia, of Kedia Jewellery House.

Knowing fully well that Indians cannot keep away from gold for long, the Reserve Bank of India first hauled up banks for selling gold coins, then came down hard on gold retailers and bullion houses. Now, they have turned their attention on investors, urging them to invest in debt instruments.

Further, in order to moderate the demand for gold for domestic use, the government has also restricted the import of gold on a consignment basis. A major bullion retailer in Mumbai said this would prove to be a major hurdle for exporters.

For, only those exporting gold jewellery will first have to impose on banks for each consignment, given that banks will henceforth be allowed to import gold only to meet the genuine needs of exporters of gold jewellery.

Haresh Soni, president of the All India Gems and Jewellery Trade Federation said the move is fundamentally against international norms of gold trading. “The government is driving gold into private hands,” he said.

A senior official of a jewellery house in Goa said that the government had decided to initiate fresh measures this week to curb the buying instinct inherent in most Indians. Especially in May, when the government was concerned that gold demand could jump to new highs due to the Akshaya Tritiya festival.

However, despite the government’s best efforts, Indian consumers’ desire for the glitter of the metal has been difficult to douse. Indians bought when there were irrationally high global prices, and again, when prices hit new lows.

Gold price, which stood at $271 an ounce on September 10, 2001, climbed to $1,450 an ounce early May. India’s appetite has only grown over the years.

Again, when gold climbed to $1,900 per ounce in August 2011, Indians did not falter. Now, that prices have slid to $1,394 an ounce, falling through the psychologically important $1,400 level, Indian consumers are just about gathering their breath to hit retail outlets again.

On Thursday, gold was quoted in Mumbai down 11% since end-March.

India’s apex bank the Reserve Bank of India is aware of the mad rush that will follow and is to kick off the sale of bonds for the first time in over a decade.

The deal is that these instruments will protect savings of the poor and middle class consumers from inflation and incentivise households to save in financial instruments rather than buy gold. IIBs could well be a potential game changer, simply because there aren’t any financial products in India that explicitly insulate against inflation risk.

The Chairman to the Prime Minister’s Economic Advisory Council C Rangarajan has also said that India needs to bring down its gold demand from about 1,000 tonne a year to 700 tonne. Further measures are on with the government to make Indians shun gold. Now, if only the Indian consumer takes heed!