{"id":347743,"date":"2025-10-10T18:21:53","date_gmt":"2025-10-10T12:51:53","guid":{"rendered":"https:\/\/forumias.com\/blog\/?page_id=347743"},"modified":"2025-10-10T18:21:53","modified_gmt":"2025-10-10T12:51:53","slug":"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-ba","status":"publish","type":"page","link":"https:\/\/forumias.com\/blog\/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-ba\/","title":{"rendered":"[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."},"content":{"rendered":"

Introduction<\/strong><\/h2>\n

India\u2019s households hold over 25,000 tonnes of gold<\/strong>\u2014worth nearly $2.4 trillion (\u224855% of GDP, FY26)<\/strong>\u2014lying idle. A revitalised Gold Monetisation Scheme (GMS)<\/strong> can transform this dormant wealth into productive financial capital.<\/p>\n

Potential of a Revitalised GMS<\/strong><\/p>\n

Mobilising Dormant Wealth for National Growth<\/strong><\/h2>\n
    \n
  1. India imports nearly 87% of its gold demand<\/strong>, contributing 8% to its import bill<\/strong> and widening the current account deficit<\/strong>.<\/li>\n
  2. A restructured GMS can recycle domestic gold<\/strong>, reducing import dependency and stabilising external balances.<\/li>\n
  3. As per the Economic Survey 2022-23<\/strong>, a 10% mobilisation of household gold can release $240 billion<\/strong> of liquidity\u2014sufficient to fund major infrastructure projects under PM Gati Shakti<\/strong> or boost capital formation in MSMEs<\/strong>.<\/li>\n<\/ol>\n

    Lower Cost of Capital Formation<\/strong><\/h2>\n
      \n
    1. The cost of funds<\/strong> via GMS (estimated 4.5\u20136.5%<\/strong>) is cheaper than external commercial borrowings (~8\u20139%)<\/strong>.<\/li>\n
    2. Mobilised gold deposits can be channelled through sovereign gold bonds, infrastructure funds, or green energy financing<\/strong>, lowering India\u2019s dependence on volatile foreign portfolio inflows.<\/li>\n<\/ol>\n

      Enhancing Financial Inclusion and Formalisation<\/strong><\/h2>\n
        \n
      1. With over 60% of household savings in physical assets<\/strong>, GMS can shift the cultural orientation towards financialised savings<\/strong>, improving household balance sheets.<\/li>\n
      2. Digitised GMS accounts (linked to Jan Dhan\u2013Aadhaar\u2013Mobile trinity<\/strong>) can foster rural participation and integrate informal savings into the formal economy.<\/li>\n<\/ol>\n

        Strengthening Monetary Resilience<\/strong><\/h2>\n
          \n
        1. According to the RBI\u2019s Report on Currency and Finance (2023)<\/strong>, India\u2019s vulnerability to gold-import shocks can be reduced by enhancing domestic liquidity in gold-backed assets<\/strong>.<\/li>\n
        2. The move aligns with the Atmanirbhar Bharat<\/strong> vision\u2014making India self-reliant in financial resources while easing pressure on the rupee.<\/li>\n<\/ol>\n

          Institutional Reforms for Trust-Based Participation<\/strong><\/h2>\n

          Strengthened Infrastructure and Transparency<\/strong><\/p>\n

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

            Regulatory and Tax Rationalisation<\/strong><\/h2>\n
              \n
            1. Remove GST and customs duties<\/strong> on gold deposited under GMS to prevent double taxation.<\/li>\n
            2. Offer tax-free interest<\/strong> and capital gains exemption<\/strong> on redeemed gold deposits to attract participation.<\/li>\n
            3. A dedicated GMS Act<\/strong> can consolidate fragmented rules under RBI, BIS, and Ministry of Finance for policy coherence.<\/li>\n<\/ol>\n

              Banking and Institutional Linkages<\/strong><\/h2>\n
                \n
              1. Involve scheduled commercial banks, NBFCs, and fintech platforms<\/strong> to create hybrid \u201cDigital Gold Deposit Accounts<\/strong>.\u201d<\/li>\n
              2. Encourage public-private partnerships (PPPs)<\/strong> to manage collection centres securely and efficiently.<\/li>\n
              3. Introduce deposit insurance cover<\/strong> through DICGC<\/strong> to enhance depositor confidence.<\/li>\n<\/ol>\n

                Awareness and Behavioural Transformation<\/strong><\/h2>\n
                  \n
                1. Launch nationwide campaigns under Jan Suraksha Abhiyan<\/strong> to destigmatise gold surrender and build trust.<\/li>\n
                2. Promote gold-backed microcredit<\/strong> and digital gold wallets<\/strong> through fintech innovations.<\/li>\n
                3. Leverage religious trusts, SHGs, and women\u2019s cooperatives to facilitate grassroots mobilisation of household gold.<\/li>\n<\/ol>\n

                  Critical Analysis<\/strong><\/h2>\n
                    \n
                  1. While GMS 2015 mobilised barely 25 tonnes<\/strong> due to low awareness, valuation mistrust, and administrative friction, a revitalised, digital, and incentive-driven model<\/strong> can overcome these limitations.<\/li>\n
                  2. However, success hinges on building institutional credibility<\/strong>, regulatory clarity<\/strong>, and cultural sensitivity<\/strong>\u2014recognising gold as both economic capital<\/strong> and emotional wealth<\/strong>.<\/li>\n<\/ol>\n

                    Conclusion<\/strong><\/h2>\n

                    As John Maynard Keynes<\/strong> observed, \u201cCapital development depends on confidence.\u201d<\/strong> A trust-based, transparent GMS can unlock India\u2019s hidden wealth, enabling Atmanirbhar financial growth<\/strong> rooted in domestic resilience and collective confidence.<\/p>\n","protected":false},"excerpt":{"rendered":"

                    Introduction India\u2019s households hold over 25,000 tonnes of gold\u2014worth nearly $2.4 trillion (\u224855% of GDP, FY26)\u2014lying 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 India imports nearly 87% of its gold demand, contributing 8% to its… Continue reading [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.<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-347743","page","type-page","status-publish","hentry","entry"],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/347743","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=347743"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/347743\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=347743"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}