What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'? 1. To bring the idle gold lying with India households into the economy 2. To promote FDI in the gold and jewellery sector 3. To reduce India’s dependence on gold imports Select the correct answer using the code given below:

QUESTION

Medium

Economy

Prelims 2016

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'?

To bring the idle gold lying with India households into the economy
To promote FDI in the gold and jewellery sector
To reduce India’s dependence on gold imports

Select the correct answer using the code given below:

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Explanation

Statement 1 is correct: This is the primary objective of the Gold Monetization Scheme (GMS). The scheme encourages individuals and institutions to deposit their idle physical gold (jewellery, coins, bars) with banks. This gold is then melted, assayed, and added to the country's gold reserves, which can be lent to jewellers, thereby bringing it into the formal economy.

Statement 2 is incorrect: These schemes are focused on managing domestic gold supply and demand. They are not designed to attract Foreign Direct Investment (FDI). Policies related to FDI in the jewellery sector are separate from these schemes.

Statement 3 is correct: This is a core objective of both schemes.

The Sovereign Gold Bond (SGB) Scheme provides a financial alternative to buying physical gold. By shifting demand from physical gold to paper gold, it helps reduce the demand for gold imports.
The Gold Monetization Scheme (GMS) increases the domestic supply of recycled gold available to jewellers, thus reducing their reliance on imported gold. Both schemes aim to curb gold imports, which are a major component of India's import bill and contribute significantly to the Current Account Deficit (CAD).

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