GOLD MONETISATION AND RUPEE INTERNATIONALIZATION

Kangan Jain; Sanjeev Pandiya

Kangan Jain Assistant Professor, Keshav Mahavidyalaya, University of Delhi
Sanjeev Pandiya President- Treasury Services, Pankti Management Consultancy(P) Ltd., Mumbai

Keywords: Gold Monetisation, currency internationalization, seigniorage, exorbitant privilege, reserve currency

Abstract

The gold monetisation scheme which would replace both the present Gold Deposit and Gold Metal Loan
Schemes, is a welcome initiative by the government to put into use the hitherto stashed yellow metal.
It would allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain
loans in their metal account. The scheme also provides sovereign gold bonds and gold coins. The GMS,
if subscribed well, in addition to other macro economic variables can lead to a truly international rupee.
The benefits of currency internationalization such as seigniorage, ability to finance imports in own
currency-a natural hedge in cross border transactions, finance deficits and the geopolitical influence
which is an "exorbitant privilege" can be achieved with successful implementation of the GMS in addition
to a stable growth oriented economy and a well developed and deep financial market.