Unglittering Gold Schemes in India

What is it about?

Indians are gold lovers and invest a major portion of their finances in buying gold ornaments which reflect status and provide a safe investment option. However, most of the gold in Indian households lies idle in bank lockers (Kumar, Arthshastra Indian Journal of Economics & Research, 2014), safes and vaults making it a dead investment (Laurence, International Advances in Economic Research, 2000). The demand for gold in India has resulted in a surge in gold imports which inversely affects the value of the rupee and is creating an outflow of currency into world trade (Laurence, International Advances in Economic Research, 2000). The idleness and unproductive use of gold in India is creating a gap in the Indian economy (Panda et al., Indian Journal of Finance, 2016). Gold monetization can help fill the gap without importing gold from other countries (D’Souza, Economic and Political Weekly, 2015). Realizing the need to increase the circulation of gold in the market and to reduce gold imports, gold prices and the burden on the Indian economy, the Government of India (GoI) introduced initiatives such as gold bonds, gold monetization and gold coin schemes in 2015 (Government of India, Gold Monetization Scheme, 2015, https://www.dea.gov.in/gms2015) (Online Supplemental Appendix Table 1). A thorough literature review revealed studies related to the importance of gold monetization for macroeconomic stability, the emotional attachment of Indians to gold, and bankers’ and refineries’ perception of gold monetization policy in India (Singh et al., IIMB WP No. 534, 2017)

Featured Image