[Answered] Evaluate the potential of a revitalised Gold Monetisation Scheme (GMS) to mobilize dormant assets for national growth. Critically analyze the institutional reforms needed to ensure trust-based participation.

Introduction

India’s households hold over 25,000 tonnes of gold—worth nearly $2.4 trillion (≈55% of GDP, FY26)—lying idle. A revitalised Gold Monetisation Scheme (GMS) can transform this dormant wealth into productive financial capital.

Potential of a Revitalised GMS

Mobilising Dormant Wealth for National Growth

1. India imports nearly 87% of its gold demand, contributing 8% to its import bill and widening the current account deficit.
2. A restructured GMS can recycle domestic gold, reducing import dependency and stabilising external balances.
3. As per the Economic Survey 2022-23, a 10% mobilisation of household gold can release $240 billion of liquidity—sufficient to fund major infrastructure projects under PM Gati Shakti or boost capital formation in MSMEs.

Lower Cost of Capital Formation

1. The cost of funds via GMS (estimated 4.5–6.5%) is cheaper than external commercial borrowings (~8–9%).
2. Mobilised gold deposits can be channelled through sovereign gold bonds, infrastructure funds, or green energy financing, lowering India’s dependence on volatile foreign portfolio inflows.

Enhancing Financial Inclusion and Formalisation

1. With over 60% of household savings in physical assets, GMS can shift the cultural orientation towards financialised savings, improving household balance sheets.
2. Digitised GMS accounts (linked to Jan Dhan–Aadhaar–Mobile trinity) can foster rural participation and integrate informal savings into the formal economy.

Strengthening Monetary Resilience

1. According to the RBI’s Report on Currency and Finance (2023), India’s vulnerability to gold-import shocks can be reduced by enhancing domestic liquidity in gold-backed assets.
2. The move aligns with the Atmanirbhar Bharat vision—making India self-reliant in financial resources while easing pressure on the rupee.

Institutional Reforms for Trust-Based Participation

Strengthened Infrastructure and Transparency

1. Establish BIS-accredited assaying and hallmarking centres nationwide to ensure purity verification and fair valuation.
2. Create a National Gold Exchange (as proposed by SEBI) for transparent pricing and traceable transactions.
3. Introduce blockchain-based tracking systems for depositor assurance and traceability of gold flows.

Regulatory and Tax Rationalisation

1. Remove GST and customs duties on gold deposited under GMS to prevent double taxation.
2. Offer tax-free interest and capital gains exemption on redeemed gold deposits to attract participation.
3. A dedicated GMS Act can consolidate fragmented rules under RBI, BIS, and Ministry of Finance for policy coherence.

Banking and Institutional Linkages

1. Involve scheduled commercial banks, NBFCs, and fintech platforms to create hybrid “Digital Gold Deposit Accounts.”
2. Encourage public-private partnerships (PPPs) to manage collection centres securely and efficiently.
3. Introduce deposit insurance cover through DICGC to enhance depositor confidence.

Awareness and Behavioural Transformation

1. Launch nationwide campaigns under Jan Suraksha Abhiyan to destigmatise gold surrender and build trust.
2. Promote gold-backed microcredit and digital gold wallets through fintech innovations.
3. Leverage religious trusts, SHGs, and women’s cooperatives to facilitate grassroots mobilisation of household gold.

Critical Analysis

1. While GMS 2015 mobilised barely 25 tonnes due to low awareness, valuation mistrust, and administrative friction, a revitalised, digital, and incentive-driven model can overcome these limitations.
2. However, success hinges on building institutional credibility, regulatory clarity, and cultural sensitivity—recognising gold as both economic capital and emotional wealth.

Conclusion

As John Maynard Keynes observed, “Capital development depends on confidence.” A trust-based, transparent GMS can unlock India’s hidden wealth, enabling Atmanirbhar financial growth rooted in domestic resilience and collective confidence.