Craze for gold in Indians has led to a surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of the Gold Monetization Scheme. (UPSC 2015)

India’s gold appetite continues to strain the trade account. In such a setting, the Gold Monetisation Scheme seeks to convert idle household gold into productive financial assets and reduce import dependence.

• Merits: It mobilises dormant gold held by households, temples and institutions, turning dead wealth into bank deposits.
• It can reduce fresh imports, save foreign exchange and ease pressure on the current account and rupee.
• Depositors gain safe custody, interest earnings and tax benefits, while jewellers can access gold through metal loans.
• It supports recycling of domestic gold and deepens formal savings.

• Limits: Cultural attachment to ornaments, fear of loss of design value on melting, and low returns reduce participation.
• Past mobilisation has been far below potential, showing weak trust and awareness.

The scheme is useful, but only as a supplement. Wider success needs better purity-testing, higher incentives, simpler rules and trust-building, alongside measures to curb non-essential gold demand.