Why PM Modi Asked Indians to Avoid Buying Gold
Prime Minister Narendra Modi recently appealed to citizens to avoid buying gold for one year. His message came amid rising tensions in West Asia, increasing crude oil prices, and pressure on the Indian rupee. Since India imports most of the gold consumed in the country, every purchase leads to a significant outflow of U.S. dollars.
Gold is not mined in large quantities in India, and nearly 90 percent of domestic demand is met through imports. This makes gold one of India’s largest non-oil imports. In the 2025–26 financial year, India’s gold imports were estimated at around $72 billion, creating a substantial burden on the country’s external finances.
How Gold Imports Affect India’s Economy
When India imports gold, payments are made in U.S. dollars. Higher imports increase demand for dollars, which can weaken the rupee. A weaker rupee makes essential imports such as crude oil, electronics, and industrial raw materials more expensive.
Large import bills also widen the current account deficit, which occurs when a country spends more foreign currency than it earns. If this deficit rises significantly, the Reserve Bank of India may need to use foreign exchange reserves to support the rupee.
How Much Money Could India Save?
Economists estimate that if Indians sharply reduce gold purchases, the country could save between $20 billion and $36 billion in foreign exchange depending on how much demand declines. A full-year halt in imports could theoretically reduce a major source of dollar outflow.
These savings could:
- Strengthen the rupee
- Protect foreign exchange reserves
- Reduce imported inflation
- Lower the current account deficit
- Improve investor confidence
Countries and Industries That Would Be Affected
India is among the world’s largest consumers of gold, so reduced demand would affect major gold-exporting countries such as Switzerland, United Arab Emirates, South Africa, Australia, and Canada.
International gold prices could face temporary pressure, and jewellery companies in India may see lower sales. However, many analysts believe the long-term effect may be limited because gold remains deeply embedded in Indian traditions.
What Could Indians Do Instead of Buying Gold?
If households redirect money that would normally be spent on gold, they may invest in:
- Mutual funds
- Fixed deposits
- Equity markets
- Government bonds
- Real estate
This shift could strengthen India’s financial markets and provide more capital for businesses and infrastructure development.
Can Indians Really Stop Buying Gold?
Gold plays a central role in weddings, festivals such as Diwali, and household savings. For many families, gold serves as both a cultural symbol and a financial safety net.
Because of this, experts believe PM Modi’s appeal may influence sentiment temporarily, but it is unlikely to permanently change India’s relationship with gold.
