Answer

Introduction

Despite India being one of the world’s largest private gold holders, over 25,000 tonnes lie idle in households and temples. Mobilizing this gold is vital for financial Atmanirbharta to reduce import dependence, strengthen domestic reserves, and build internal capital resilience against external economic shocks and currency volatility.

Body

Key Challenges Hindering Success of the Gold Monetisation Scheme (GMS)

• Low Public Trust and Emotional Attachment: Indians view gold as security and sentiment, not a financial instrument.
  Eg: Rural households prefer physical storage to bank deposits, fearing loss of ownership or purity dilution.
• Inadequate Infrastructure for Collection and Testing: Limited number of Collection and Purity Testing Centres (CPTCs) makes participation inconvenient.
  Eg: Many Tier-2 and Tier-3 cities lack certified testing facilities, discouraging depositors.
• Complex Procedures and Bureaucratic Delays: Lengthy documentation, valuation, and redemption processes deter participation.
  Eg: Initial schemes required long lock-in periods and physical visits to multiple institutions.
• Limited Institutional Participation and Awareness: Banks show lukewarm interest due to low margins and the public remains unaware of scheme benefits.
  Eg: As of 2023, less than 25 tonnes of gold were mobilized, far below expectations.
• Market Volatility and Low Returns: Returns on GMS deposits (around 2–2.5%) are unattractive compared to gold’s price appreciation.
  Eg: Investors prefer holding gold ETFs or coins instead of depositing in GMS.
  

Measures to Build a Robust, Trust-Based Ecosystem for Financial Atmanirbharta

• Strengthen Trust through Transparency and Insurance: Introduce government-backed insurance for purity and quantity to reassure depositors.
  Eg: Similar to deposit insurance in banks, gold deposit insurance could reduce psychological barriers.
• Expand and Digitize Gold Infrastructure: Establish more CPTCs and promote digital tracking using blockchain to ensure transparency.
  Eg: A blockchain-based registry like in Dubai Gold Souk ensures traceability and authenticity.
• Enhance Financial Literacy and Community Engagement: Use SHGs, temples, and local cooperatives for awareness drives linking GMS with social trust.
  Eg: Kerala’s temple gold deposit drives have shown better participation through local confidence networks.
• Integrate with Digital Finance Ecosystem: Link GMS with e-gold, digital rupee, and fintech apps for seamless participation.
  Eg: RBI’s digital gold bonds could be convertible to GMS accounts for liquidity.
• Provide Fiscal Incentives and Flexible Schemes: Offer tax exemptions, shorter lock-in periods, and flexible redemption options.
  Eg: Japan’s “Gold Savings Account” model offers liquidity while earning interest.

Conclusion

To unlock its dormant gold wealth, India must shift from a compliance-based to a confidence-based model. Building transparency, incentives, and digital integration can transform GMS into a cornerstone of financial Atmanirbharta, reducing gold imports, strengthening reserves, and converting household sentiment into national economic strength.

DOWNLOAD PDF