UPSC Prelims 2016 Q71: Indian Economy – Financial Markets & Capital Markets
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.
- (a) 1 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Answer: (c) 1 and 3 only
Explanation
Sovereign Gold Bond Scheme and Gold Monetization Scheme
Both were launched in November 2015.
| Statement | Verdict | Fact |
|---|---|---|
| 1. To bring the idle gold lying with Indian households into the economy | Correct | The Gold Monetization Scheme lets people deposit gold with banks and earn interest |
| 2. To promote FDI in the gold and jewellery sector | Incorrect | Neither scheme is about foreign investment |
| 3. To reduce India's dependence on gold imports | Correct | Sovereign Gold Bonds replace the buying of physical gold |
The two schemes compared:
| Feature | Sovereign Gold Bond | Gold Monetization Scheme |
|---|---|---|
| What you give | Money | Physical gold |
| What you get | A bond linked to the gold price, plus interest | Interest on the deposited gold |
| Issued by | RBI on behalf of the Government | Banks |
| Effect | Less demand for imported gold | Idle gold put to use |
Answer: (c) 1 and 3 only.
Why each option is right or wrong
- (a) Incorrect. Statement 3 is also true: the schemes aim to cut gold imports.
- (b) Incorrect. Statement 2 is false; FDI in jewellery is not a purpose.
- (c) CORRECT. The schemes mobilise idle gold and reduce dependence on gold imports.
- (d) Incorrect. Statement 2 is false; neither scheme promotes FDI.
Key point
Sovereign Gold Bonds (paper gold, issued by RBI) and Gold Monetization Scheme (deposit idle gold): both from 2015, to cut gold imports and use idle gold.
Remember
Gold schemes = use idle gold, cut imports.
Common mistakes
- Adding FDI because it appears in many economic questions.
- Confusing which scheme takes physical gold: it is the Gold Monetization Scheme.
- Forgetting why gold imports matter: they widen the current account deficit.
Exam tip
Both gold schemes have one goal: less imported gold.
Sources
- Reserve Bank of India — Sovereign Gold Bond Scheme and Gold Monetization Scheme, 2015 Directions
- Press Information Bureau — Prime Minister launches gold schemes (5 November 2015)