India's Jewellery Sector Seeks Overhaul of Gold Monetisation Scheme to Unlock up to $90 Billion in Liquidity

India's Gold Industry Seeks Revamp of Gold Monetisation Scheme

India's goldsmith and jewellery bodies, including the All India Gem And Jewellery Domestic Council (GJC) and the All India Jewellers and Goldsmith Federation (AIJGF), have urged the government to revamp the Gold Monetisation Scheme (GMS) to reduce gold inflows without impacting domestic demand or livelihoods tied to the sector. The move comes after Prime Minister Narendra Modi issued a call to citizens to defer their gold purchases for a year, which could threaten the livelihoods of nearly 3.5 crore people dependent on the gold and jewellery ecosystem.

India is one of the largest purchasers of gold across the world, with the yellow metal acting as a store of value and being used for ornamental purposes. Industry bodies suggest that this has led to "ideal gold," which can unlock immense value through a redefined and regulated GMS. Introduced in 2015, the GMS aimed to trim the current account deficit by curbing gold imports by encouraging investors to purchase the gold scheme instead of buying physical gold.

Comparison of Gold Monetisation Scheme Performance

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By March 2025, only 38 tonnes were monetised, which is on the lower side compared to India's estimated gold holdings of 25,000 tonnes. The government discontinued medium-term and long-term deposits, leading to the failure of the scheme due to mounting losses in terms of interest borne by the exchequer.

The industry bodies suggested a revitalised Scheme, which includes addressing emotional and logistical barriers, as Indians tend to trust family jewellers over banks. Some recommended suggestions include allowing certified local jewellers to serve as collection and purity-testing centres and introducing an e-Gold Savings account to keep the gold in its original form while providing owners with a digital certificate and interest earnings.

Additionally, a one-time disclosure window without income tax scrutiny would encourage the integration of hidden gold into the banking system. Experts believe that even if the 2.25 percent annual interest is foregone, investors may still be interested in the scheme to safely store and maintain their value of gold.

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Aamir Makda, Choice Broking, suggested that if the revamped scheme successfully mobilizes even five percent of India's private gold holdings, which would be around 1,250 tonnes, it would be equivalent to $80 to $90 billion in internal liquidity. This could theoretically zero out India's gold imports for nearly two years, drastically reducing the demand for US Dollars and potentially causing the Rupee to appreciate significantly.

Rajesh Rokde, Chairman of GJC, stated that a revamped GMS could lead to the reduction of import dependence, while also strengthening the formal gold economy and converting idle gold into "productive national capital."