Why India needs a gold-backed pension scheme: Insights from SBI Research report

The recent State Bank of India (SBI) report titled "Coming of (A Turbulent) Age: The Great Global Gold Rush" highlights the evolving role of gold in India’s economy and suggests the potential for creating a comprehensive gold policy that could include innovative financial instruments, such as a gold-backed pension scheme.

"The report emphasises the need for India to reassess its approach to gold, positioning it not just as a commodity, but as an integral part of the national financial infrastructure," noted SBI report

However, there is also a need to have greater debate on evolving a comprehensive policy on gold (say gold-backed pension scheme) that will integrate with broader financial sector reforms and with currency convertibility on the capital account, it added

Benefits of a gold-linked pension scheme

1. Historically, gold has been a reliable store of value, especially in times of economic uncertainty. Given India's high dependence on gold imports and its cultural affinity for the metal, linking gold to a pension scheme could serve as an effective hedge against inflation.

2. A gold-backed pension scheme could offer a steady growth trajectory, leveraging gold’s price appreciation over time. The report notes that gold prices have seen substantial increases in recent years, making it an attractive addition to a diversified pension portfolio.

3.By linking gold to financial instruments like gold-backed pension funds, this would reduce the pressure on physical gold demand, offering a more structured and productive means of holding gold as part of one's retirement plan.

Gold-backed pension schemes would be a crucial part of this strategy, enabling individuals to create long-term wealth in a secure and regulated manner. A dedicated gold policy could lay the groundwork for integrating gold more seamlessly into the financial system, offering both security and growth for future generations.