India finds key to unlock its $5 tn sleeping giant

India holds the title of having the world's largest private gold reserves, an estimated 25,000 to 50,000 tonnes, mostly tucked away in homes, temples, and jewellers' vaults. Recognizing this colossal untapped economic potential, the Indian government is set to revamp its Gold Monetisation Scheme (GMS) to turn this dormant gold into a functioning economic asset.

The revamped scheme, expected to be launched later this month, will delegate the responsibility of mobilising the gold to the jewellers, a group the public inherently trusts with their valuables.

If successful, the scheme aims to benefit Indian jewellers by offering them an additional 1% incentive on gold collected from customers. This incentive, which could potentially translate to nearly 1% commission on the value of the gold handled, is expected to be a major motivator for jewellers to actively promote the scheme. The move could slash India's gold imports, currently standing at 700 to 900 tonnes annually, by up to 900 tonnes, effectively lowering the country's import bill and easing the pressure on the economy.

The proposal has garnered support from industry experts who view the incentive as a "game changer" for jewellers. With a 0.75% to 1% margin, the scheme could significantly improve jewellers' working capital, lower financing costs, and promote cross-selling of products. Lower financing costs, in particular, stand to benefit the jewellers by reducing interest payments on gold metal loans from 5% to between 2% and 4%.

As the government moves forward with the scheme, it presents a significant opportunity for India's jewellery industry to not only mobilize idle wealth but also unlock a previously sleeping economic giant.