← All questionsGS3 · 2015 · Indian Economy ·Gold Monetisation Scheme Merits
QUESTION 2
GS3
12.5 marks

Craze for gold in Indians has led to a surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of the Gold Monetization Scheme.

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9 min
200 words
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What the examiner wants

Examine how the Gold Monetisation Scheme could cut gold imports and ease pressure on the balance of payments and rupee.

ExamineGo into the details, test each point against evidence, and conclude on what it shows.

Demand-wise check

  1. 1Problem: India among the top gold importers; imports widened CAD to 4.8% of GDP in 2012-13; idle household gold≈35 words
  2. 2GMS (2015) design: deposit idle gold in banks, earn interest, gold lent to jewellers - reduces imports≈35 words
  3. 3Merits: mobilises idle gold, lowers CAD, supports rupee, safety for households, formalises gold trade≈35 words
  4. 4Limits: emotional attachment, purity testing hassles, low interest, few collection centres - low uptake; medium/long-term deposits ended in 2025≈35 words

Open in about 30 words and close in about 30.

Answer plan

Gold craze and BoP pressureScheme designMeritsLimitsCompanion schemes

Where marks usually go

  • Only describing the scheme, not its macro merits
  • Ignoring actual weak uptake

Draw this

  • Flow: household gold → bank → refiner → jewellers, replacing imports

Value addition

  • DataIndia's current account deficit hit 4.8% of GDP in 2012-13, partly due to gold imports.RBI
  • DataIndian households are estimated to hold about 25,000 tonnes of gold.World Gold Council

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