The Multi-Billion Dollar Habit
India's love for gold is a serious economic issue. As one of the world's largest consumers of the yellow metal, but with minimal domestic production, the country relies heavily on imports. This has a direct impact on the nation's finances. In the fiscal
year 2026, India's gold import bill soared to a record $71.98 billion. This happened even though the actual volume of gold imported decreased slightly from the previous year, a situation driven by rising global gold prices. When a country spends more on imports than it earns from exports, it creates a current account deficit (CAD). High gold imports are a major contributor to India's CAD, second only to crude oil, putting pressure on foreign exchange reserves and weakening the rupee.
An Untapped Treasure at Home
The irony is that while India spends billions importing gold, a vast, untapped reserve already exists within its borders. Estimates from the World Gold Council and other bodies suggest that Indian households and temples hold somewhere between 25,000 and 34,600 tonnes of gold. At current market prices, this private stockpile is worth trillions of dollars—more than the GDP of many nations. This is wealth that sits largely idle in lockers and jewellery boxes, not contributing to the formal economy. The core idea gaining traction is that if even a fraction of this dormant gold could be brought into the financial system, it could be used to meet domestic demand, thereby reducing the need for new imports.
The Mechanism: Gold Monetization
The primary tool for this strategy is the Gold Monetization Scheme (GMS), first launched in 2015. The concept is straightforward: it encourages individuals and institutions to deposit their physical gold (in the form of bars, coins, or jewellery) with banks. In return, they earn interest, and the principal is returned in the form of gold or its cash equivalent at maturity. The deposited gold is then refined and can be lent to jewellers, reducing their dependence on imported bullion. This creates a domestic supply loop, where the gold already in the country is recycled back into the market for productive use.
Challenges of Trust and Tradition
Despite the compelling economic logic, the GMS has seen limited success. Since its launch in 2015, the scheme has only mobilized around 39 tonnes of gold—a tiny fraction of the estimated 25,000-plus tonnes held by households. The reasons are deeply rooted in culture and sentiment. For many Indian families, gold jewellery is an heirloom passed down through generations, not just a financial asset. There is a reluctance to part with these items, especially when the process involves melting them down to test for purity. Issues of trust, logistical hurdles like travelling to purity testing centres, and emotional attachment have proven to be significant barriers to wider adoption.
A New Push Involving Jewellers
Recognizing these challenges, there are now plans to revamp the scheme by bringing a key player into the fold: the local jeweller. The logic is that families are far more likely to trust their neighbourhood jeweller than a faceless bank. Under proposed changes, jewellers would act as collection agents, receiving incentives for the gold they gather. For jewellers, the benefit is access to a domestic source of gold, which could come with lower financing costs compared to borrowing against imported gold. This shift acknowledges that to successfully monetize household gold, the solution needs to be built on existing relationships of trust rather than trying to create new ones.
