What is/are the purpose/purposes of Governments Sovereign Gold Bond Scheme and Gold Monetization Scheme? 1. To bring the idle gold lying with Indian households into the economy 2. To promote FDI in the gold and jewellery sector 3. To reduce Indias depende

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Q: 46 (IAS/2016)
What is/are the purpose/purposes of Governments Sovereign Gold Bond Scheme and Gold Monetization Scheme?
1. To bring the idle gold lying with Indian households into the economy
2. To promote FDI in the gold and jewellery sector
3. To reduce Indias dependence on gold imports
Select the correct answer using the code given below.

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,165,75,20,10,165,45

keywords: 

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The correct answer is Option 3: 1 and 3 only.

The Government of India launched the Sovereign Gold Bond Scheme (SGB) and Gold Monetization Scheme (GMS) with the following objectives:

1. To bring the idle gold lying with Indian households into the economy:

The Sovereign Gold Bond Scheme (SGB) aims to mobilize the idle gold lying with households in India by providing an opportunity for investors to invest in government securities denominated in grams of gold. The scheme offers an alternative to the physical gold by offering an assured interest rate and a redemption price linked to the prevailing market price of gold. By investing in SGBs, individuals can earn interest on their gold holdings and can also benefit from any appreciation in the price of gold over the holding period.

2. To promote FDI in the gold and jewellery sector:

The Gold Monetization Scheme (GMS) aims to monetize the idle gold lying with households by allowing them to deposit their gold with banks and earn interest on it. The deposited gold is then used to meet the domestic demand for gold and reduce the country`s dependence on gold imports. This, in turn, helps in promoting foreign direct investment (FDI) in the gold and jewellery sector as it reduces the demand for physical gold imports.

3. To reduce India`s dependence on gold imports:

India is one of the largest consumers of gold in the world, and a significant portion of the country`s demand is met through imports. The government launched these schemes to reduce India`s dependence on gold imports and to conserve foreign exchange reserves. The Gold Monetization Scheme (GMS) helps in mobilizing the idle gold lying with households and using it for productive purposes, such as meeting the domestic demand for gold, instead of importing it. The Sovereign Gold Bond Scheme (SGB) offers an attractive investment option to individuals who otherwise invest in physical gold, thereby reducing the demand for physical gold imports.

In conclusion, the purpose of the Government`s Sovereign Gold Bond Scheme and Gold Monetization Scheme is to bring idle gold lying with Indian households into the economy and reduce India`s dependence on gold imports. While promoting FDI in the gold and jewellery sector is not a direct objective of these schemes, it is a positive side effect of reducing the demand for physical gold imports.