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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 Indian 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.
Explanation
The correct answer is option C (statements 1 and 3 only).
The Sovereign Gold Bond (SGB) is a substitute for holding physical gold[2], and one of its purposes is to make gold a productive asset by using its low interest rate as a financial tool to help[3] uplift the industry. This achieves the objective of bringing idle gold into the economy (Statement 1 is correct).
The craze for gold in Indians has led to a surge in import of gold in recent years and put pressure on BOP and external value of rupee[5]. Both the Sovereign Gold Bond Scheme and Gold Monetization Scheme were designed to address this issue by reducing the need for physical gold imports (Statement 3 is correct).
However, Statement 2 is incorrect. While 100 percent FDI is permitted under the automatic route in the gold sector[6], promoting FDI is not a stated purpose of these schemes. The schemes primarily aim to reduce physical gold demand and mobilize idle gold holdings, not to attract foreign investment in the gold and jewellery sector.
Sources- [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > Sovereign Gold Bond Scheme > p. 267
- [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > Sovereign Gold Bond Scheme > p. 267
- [3] https://www.niti.gov.in/sites/default/files/2019-06/Report_GoldMarket.pdf
- [4] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c} > p. 490
- [5] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c} > p. 490
- [6] https://www.niti.gov.in/sites/default/files/2019-06/Report_GoldMarket.pdf
PROVENANCE & STUDY PATTERN
Guest previewThis is a classic 'Scheme Objective' question. Standard economy texts (Singhania/Vivek Singh) explicitly link SGB and GMS to 'mobilizing domestic gold' and 'reducing imports' (CAD management). The trap lies in Statement 2: confusing a domestic savings instrument with foreign investment policy.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Statement 1: Is bringing idle gold held by Indian households into the economy a stated purpose of the Government's 'Sovereign Gold Bond Scheme' and 'Gold Monetization Scheme'?
- Statement 2: Is promoting foreign direct investment (FDI) in the gold and jewellery sector a stated purpose of the Government's 'Sovereign Gold Bond Scheme' and 'Gold Monetization Scheme'?
- Statement 3: Is reducing India's dependence on gold imports a stated purpose of the Government's 'Sovereign Gold Bond Scheme' and 'Gold Monetization Scheme'?
- Explicitly describes Sovereign Gold Bonds (SGB) as a substitute for holding physical gold — indicating a policy instrument to convert physical (household) gold into financial instruments.
- Notes issuance by RBI on behalf of the Central Government, showing this is a government-backed mechanism to absorb physical gold into the formal economy.
- Identifies a surge in gold imports and pressure on the balance of payments, then frames the Gold Monetisation Scheme (GMS) as the response to that situation.
- This linkage implies GMS aims to mobilize domestic/idle gold to reduce import dependence and relieve external sector pressure.
- Lists features and benefits of SGB (pricing, limits, demat holding), which support the idea that SGBs are designed to attract household gold into formal financial channels.
- Operational details (caps, RBI pricing) indicate a structured program to convert physical holdings into government/securities market instruments.
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