2015 · GS Paper 3 · Q7 · 12 marks
Craze for gold in Indians has 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 the Gold Monetization Scheme.
In short
The Gold Monetization Scheme of 2015 aims to recycle idle household gold into the banking system, cutting gold imports and easing pressure on the current account and the rupee. Gold imports of about $54 billion in 2012-13 helped push the current account deficit to 4.8% of GDP.
Model answer
Ghissu Editorial · Verified 4 Oct 2026 · 273 words
Import substitution
Banks lend deposited gold to jewellers through gold metal loans, so domestic stock replaces imports and eases the current account and the rupee.
Return on idle assets
Depositors earn 2.25% on medium-term and 2.5% on long-term deposits, free of capital gains tax.
Formalisation
BIS-certified purity testing centres strengthen hallmarking and bring unaccounted gold into banks, while temple trusts such as Siddhivinayak deposited gold.
Cultural attachment
Owners will not let jewellery with emotional value be melted for modest interest, so only a few tens of tonnes came in against about 25,000 tonnes held by households (World Gold Council).
Weak reach
Few purity centres, minimum deposit sizes and slow bank processes kept rural savers away.
Fiscal risk
Rising gold prices swelled the government's repayment burden, so it ended the medium and long-term deposits from March 2025.
This model answer is indicative and the model can make mistakes; please verify key facts independently.
Practise this question
1Get the answer sheet
Sized for this question.
2Write your answer
Timed, by hand.
3Get it marked
Your score and what to fix.
This chapter in the exam
Liberalization9 questions
Asked in 6 of 14 sittings since 2013
- 2025What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism ? How can these challenges be met ?
- 2018How would the recent phenomena of protectionism and currency manipulations in world trade affect macroeconomic stability of India?
All 9 questions, sorted by sub-topic, with model answers and practice.
Question from the official UPSC Civil Services (Main) Examination 2015 paper. Answer written by Ghissu's engine and checked against our editorial standards. Found an error? Tell us and we correct it within 48 hours.