Currently India is the largest consumer and importer of gold in the world. Monetizing the gold within the country is, therefore, important for macroeconomic stability, and requires a credible scheme for valuing, storing, and tracking the metal.
Gold imports contributed nearly 30% of the trade deficit of India between 2009–10 and 2012–13. Faced with this unsustainable high trade deficit in 2013 the government imposed high excise duties and import payment restrictions on gold. This had a limited impact and towards the second quarter of 2013 after banning the import of gold coins and imposing tight restrictions on gold bullion imports, the imports were linked to the level of exports. The 80:20 rule stipulated that 20% of all gold imported must be exported before further imports can be made.1 The new regulations resulted temporarily in imports of gold falling drastically even as unofficial gold continued to enter the country.
The Gold Monetization Schemes provide different options to the people to monetize the gold, by modifying the already existing two schemes, namely, the Gold Deposit Scheme and the Gold Metal Loan Scheme, in light of past experience and fresh developments and feedback. Thus, the Gold Monetization Schemes comprise of the ‘Revamped Gold Deposit Scheme’ and the ‘Revamped Gold Metal Loan’ scheme, linked together.
The objective of introducing the modifications in the schemes is to make the existing schemes more effective and to broaden the ambit of the existing schemes from merely mobilizing the gold held by households and institutions in the country to putting this gold into productive use. The long-term objective which is sought through this arrangement is to reduce the country’s reliance on the import of gold coin to meet the domestic demand.