Prelims 2016 · Q71
EasyWhat 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.
Answer & explanation
Answer: (c) 1 and 3 only
Both schemes, introduced in 2015, aim to bring gold held by Indian households into productive use and to cut the country's need to import gold. Neither is meant to attract foreign direct investment into the gold or jewellery trade.
- ✓ 1. The Gold Monetisation Scheme is meant to mobilise idle gold held by households and institutions and put it to productive use; the Sovereign Gold Bond gives savers a paper substitute for buying physical gold.
- ✗ 2. Neither scheme deals with FDI. They are about domestic gold holdings and gold bonds issued by the Government (through the RBI), not about foreign investment in gold or jewellery.
- ✓ 3. Since most gold demand is met by imports, shifting demand from physical gold to bonds, and putting household gold back into circulation, reduces import dependence and helps keep the current account deficit in check.
- • Since then The Medium and Long Term Gold Deposit components of the Gold Monetisation Scheme were discontinued from 26 March 2025 (Department of Economic Affairs, Ministry of Finance). The answer as it stood in 2016 is unchanged.
Remember · Sovereign Gold Bond and Gold Monetisation Scheme (2015): mobilise household gold and cut gold imports; they are not FDI schemes.
Sources
- Gold Monetisation Scheme, 2015 (Department of Economic Affairs, Ministry of Finance) ↗ “The objective of the Scheme is to mobilise idle gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce country’s reliance on the import of gold.”
- Introduction of Sovereign Gold Bonds Scheme (Press Information Bureau, Cabinet, 9 September 2015) ↗ “The scheme will help in reducing the demand for physical gold by shifting a part of the estimated 300 tons of physical bars and coins purchased every year for Investment into gold bonds. Since most of the demand for gold in India is met through imports”
Question and answer: UPSC's official GS Paper I (2016, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·