17th January, 2016 (MAINS)


Q1. Craze for gold in Indians have 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 Gold Monetization Scheme.

[12.5marks/2015/GS-3] 200 words.

Please write answer in the comments section.

  • Dev Verma

    Merits of gold monetization scheme with respect to balance of payments and external value of rupee:
    1.Gold Monetization Scheme will increase the supply of gold in the market thus reducing the import of gold.
    2.Lower import of gold will help to control the current account deficit restricting the higher outflow of the dollar compared to dollar inflow from exports.
    3.India’s major import bill is of Gold and Crude Oil. If import is greater than export then it increases the demand of dollar, therefore, depreciates Indian Rupee.
    4.India imports nearly all of its gold requirements and, therefore, every gram of gold India acquires, results in an outflow of foreign exchange.
    5.The new scheme, if successful, will help the country shrink its import bill and save the outflow of dollars by recycling the domestically available gold.
    6.If even 5 per cent of the gold held by people makes its way into these deposits, which will amount to a 1000 tonnes. India imports about 850-900 tonnes of gold in a year, which could be met internally.
    7.Overall it will have a positive impact on the balance of payments and will help in appreciating the value of rupee.

    • http://shashidthakur.com/ Shashi Thakur

      well tried. though feel that appreciation of money part needs to be explained a bit more. but still good job.

      • Dev Verma

        thank you for your comments…