of payments crisis - when India flew 67 tonnes of gold to Europe as collateral for a loan to avoid a sovereign debt default.
"I have not said there should be any mortgaging of the gold, or auction of the gold, that is incorrect. I have just said the RBI should look into ... how they can benefit the people, particularly with regard to the bonds or the monetisation," Sharma said in response to a question in parliament.
Earlier this week in comments reported in the national media, Sharma said that in a country with 31,000 tonnes of declared gold "even if 500 tonnes is monetised at today's value it takes care of your CAD", or current account deficit.
Selling the country's gold reserves may sit badly with Indians, many of whom saw the 1991 sale as a public humiliation. The secret operation was only exposed after a vehicle carrying the first consignment of bullion broke down on its way to the airport from the central bank.
"It (pledging gold) will be a desperate measure, and it will send a very wrong signal to the entire country because all the time we've maintained that things are under control even though things are adverse," said Madan Sabnavis, chief economist at CARE Ratings.
Such a sale would also dent international gold prices which took a hit earlier this year after Cyprus said it was considering selling its gold reserves to shore up its finances.
Some economists said India should improve the current gold deposit scheme, which allows individuals to effectively hold gold in a bank account in exchange for a certificate. They receive interest payments and can redeem the same weight in gold when the certificate matures.
Analysts say this scheme would also allow the government to funnel gold to the refinery industry and reduce import demand.
However, Indians are currently put off by the 500 gram minimum requirement. Offering higher interest rates could also draw out gold stashed in the country's temples. South India's Tirupati temple, considered one of the world's richest, is estimated to hold gold worth up to $80 billion.
Gold is considered auspicious as a gift or offering at religious festivals in India and forms an essential part of a bride's dowry.
"The biggest avenue the government has to monetise gold is the gold deposit scheme," said Shekhar Bhandari, executive vice president of treasury at Kotak Mahindra Bank. "It has the maximum potential and (encourages) recurring behaviour."