Syllabus: GS Paper-III: External Sector
Source: SBI Economic Research Report; The Assam Tribune

Why in the news?
A recent study by the State Bank of India’s Economic Research Department, titled “Coming of (A Turbulent) Age: The Great Global Gold Rush,” has urged the government to frame a comprehensive national gold policy. With global prices soaring above USD 4,000 per ounce in 2025, the report highlights India’s vulnerability due to its heavy dependence on gold imports, cultural affinity for gold, and the absence of a long-term strategic framework.

Background: India’s Deep Ties with Gold

India’s relationship with gold goes beyond economics — it symbolizes wealth, tradition, and security.

• India accounts for 26% of global gold demand, second only to China.
• 86% of India’s supply comes from imports, burdening the current account deficit.
• Gold prices have a 0.73 correlation with rupee depreciation — rising prices worsen import bills.

Key Findings of the SBI Study

Rising Gold Prices:

• Gold prices jumped over 50% in 2025 due to geopolitical instability and a weakening US dollar.
• Prices remain above USD 4,000/ounce, suggesting a long-term structural shift.

High Import Dependence:

• India mined only 1,627 kg of gold in FY25.
• Imports continue to worsen the current account deficit.

Rising Central Bank Holdings:

• RBI’s gold reserves increased to 15.2% of total reserves in FY26.
• Global comparison: U.S. & Germany hold over 77% of reserves in gold.

Emerging Gold Discoveries:

• New deposits found in Odisha, Jabalpur (MP), and Kurnool (AP) may reduce dependence.

Why a Comprehensive Gold Policy is Needed

Past policies focused mainly on restricting consumption through customs duties and import controls.

The report argues that India must decide whether gold is:

• A commodity to be traded, or
• Money and a strategic financial asset.

Policy Gaps and Recommendations

1. Establish a National Gold Framework
Integrate mining, refining, storage, trade, and financial investment systems.

2. Boost Domestic Mining & Refining
Encourage exploration and strengthen refining capacity to become a global hub.

3. Strengthen Monetisation & Financial Integration
Improve Gold Monetisation Scheme and Sovereign Gold Bonds to increase liquidity and investor confidence.

4. Promote Recycling & Local Manufacturing
Encourage recycling and support jewellery clusters under Make in India.

5. Reduce Exchange Rate Volatility
A structured strategy can stabilize the INR-USD exchange rate.

Global Comparison

• China: Unified policy linking gold with financial and strategic reserves.
• India: Fragmented approach across ministries and markets.

Exam Hook – Key Takeaways

• India imports 86% of its gold, creating external sector vulnerability.
• A national gold policy must integrate mining, monetisation, refining, and digital investment.
• Gold should be treated as both an economic asset and a cultural resource.

Mains Question:

“Discuss the need for a comprehensive gold policy in India. How can such a framework balance the cultural significance of gold with the challenges of economic dependence on imports?”

One-line wrap:
India’s golden heritage now demands a golden strategy — one that transforms cultural affinity into economic strength through a comprehensive gold policy.

Source:

https://epaper.assamtribune.com/full-page-pdf/epaper/pdf/2025/11/06/the-assam-tribune/7247/epaper-page-7?infinitescroll=1