The real reason behind PM Modi’s appeal to Indians not to buy gold for a year
Rising crude oil prices and gold imports deepen economic concerns for India
PM Modi has urged Indians to avoid purchasing gold for a minimum of a year, stating that amid a global crisis, gold purchases would further strain country’s foreign exchange reserves.
Addressing a BJP rally in Hyderabad, PM Modi has urged citizens to adopt austerity measures ranging from lowering edible oil use and avoiding gold purchases to cutting back on petrol-diesel consumption and delaying international trips, as the government struggles with the economic consequences of the current global energy crisis and rising petroleum prices.
“Gold purchases are another area where foreign exchange is used extensively. In the national interest, we must resolve not to purchase gold for a year,” said PM Modi.
India imports nearly all of its gold and it spent over USD 72 billion on gold alone last year, or about USD 6 billion a month. Gold’s dual function as a consumer import and a reserve asset complicates the situation.
As of March 2026, the Reserve Bank of India had amassed 880 tonnes of gold, having added 168 tonnes from London during the previous year. Gold now makes up 16 per cent of India’s total foreign exchange reserves, up from 10 per cent the previous year.
Moreover, the purchases usually increase dramatically during holidays and weddings. The increased demand causes a dollar outflow and expands the country’s import bill, as the gold is mostly imported.
Meanwhile, the global gold prices have been volatile due to the ongoing US-Iran confrontation, with bullion markets responding significantly with each escalation and setback in the ceasefire in West Asia.
Trading Economics’ data indicates that India has approximately USD 690.69 billion in foreign exchange reserves. According to RBI data, reserves increased to almost USD 728 billion in February before declining to about USD 691 billion in April as uncertainty around the world grew.
According to IMF projections, India’s current account deficit (CAD) might increase to USD 84.5 billion in 2026, or around 2 per cent of GDP. The CAD is widening, which indicates that more money is leaving the country than entering it.
And gold is a big reason for that. In FY26, India imported over USD 72 billion worth of gold, a 24 per cent increase over the previous year.
Gold is typically regarded as a “safe haven” asset amid geopolitical crises, which is why investors flock to purchase it in times of conflict or unpredictability.
However, the current conflict is making conditions more complicated because rising crude oil prices are also fuelling concerns about extended inflation and increased interest rates worldwide.
