Unlocking Household Gold for Financial Self-Reliance
UPSC Relevance
Prelims: Indian Economy (Banking & Financial Markets, Gold Monetisation Scheme, Balance of Payments - Trade Deficit, Current Account Deficit, Foreign Direct Investment (FDI) / Foreign Portfolio Investment (FPI)).
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Investment models. This topic is central to the mobilization of domestic resources for investment.
Key Highlights from the News
In a situation where global investments are declining and economic uncertainty persists, the article argues that India needs to achieve financial self-reliance.
A key way to achieve this is to bring the single largest private reserve in the world of gold, held by Indian households, into the economy.
Indian households hold approximately 25,000 tons of gold, valued at over 55% of India's GDP.
The Gold Paradox: Despite such a large reserve, India is still one of the world's largest imports of gold, which increases the country's trade deficit.
To resolve this paradox, the article argues for a revitalised, trust-based gold monetisation scheme.
Requirements for this scheme to succeed:
Establish more hallmarking, purity testing centres across the country.
Simple and transparent procedures.
Build trust by creating a "no questions asked" environment for investors.
If successful, this can reduce imports, control the current account deficit, and find domestic capital necessary for the country's development.
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