Why PM Modi wants Indians to avoid buying gold for a year

As geopolitical tensions in West Asia push up oil and fertiliser prices and strain global supply chains, Prime Minister Narendra Modi has now turned the spotlight toward another pressure point in India’s economy, gold imports.

Addressing a rally in Hyderabad on Sunday (May 10), Modi urged citizens to postpone gold purchases and foreign travel for a year.

The appeal came alongside calls to reduce fuel consumption, increase the use of public transport and electric vehicles, revive work-from-home practices, and promote domestic products.

The message marks one of the strongest public appeals in recent years by the government to curb discretionary imports, especially at a time when India remains heavily dependent on overseas purchases for both crude oil and gold.

Why gold matters so much to India’s economy

India is among the world’s largest consumers and importers of gold. The country consumes roughly 700–800 tonnes of gold annually but produces barely 1–2 tonnes domestically, making it dependent on imports for over 90% of its supply, as per a Bloomberg report.

Unlike many commodities, gold imports do not directly contribute to industrial production at scale. Yet they require large outflows of dollars, increasing pressure on India’s current account deficit and foreign exchange reserves. The concern becomes sharper when crude oil prices are elevated because India already imports nearly 85% of its oil requirements.

With the West Asia conflict pushing up energy and fertiliser costs, policymakers appear focused on controlling non-essential imports that add to the import bill. Gold accounts for nearly 9% of India’s total import bill, second only to crude oil among major import categories.

Imports collapse amid supply disruptions

The Prime Minister’s appeal also comes at a time when India’s gold market is already facing severe supply constraints.

Gold imports fell sharply from nearly 100 tonnes in January 2026 to around 65–66 tonnes in February, before dropping further to 20–22 tonnes in March. Imports for April are estimated at just 15 tonnes, among the lowest monthly levels seen in nearly three decades outside the Covid period.

The decline has been linked not only to weaker demand due to elevated prices but also to administrative and operational disruptions in the import pipeline.

India’s gold import system depends on authorised banks and customs clearances. Delays in renewing the annual list of approved importing banks at the start of the financial year reportedly disrupted shipments, while pending customs notifications and uncertainty around tax treatment slowed the movement of bullion further.

The squeeze has started showing up in domestic prices.

Harshal Barot, Senior Consultant – South Asia & Middle East at Metals Focus, said earlier strong imports had helped jewellers meet April demand, but prolonged weak inflows were now tightening supply conditions in the domestic market.

“Gold is at a premium of around $15 to $16 in the domestic market,” Barot said, adding that the trade was beginning to experience supply tightness.

He said the India Bullion Exchange (IIBX) had become the primary import route for gold currently, but volumes remained far below normal levels, with only around 1.5–1.8 tonnes arriving through the exchange in recent weeks.

Why the government is worried now

The timing of Modi’s appeal is significant because India typically witnesses a sharp rise in gold demand during the festive and wedding season later in the year.

Gold in India is not merely an investment asset. It remains deeply tied to weddings, festivals, household savings, rural wealth preservation, and informal credit systems. This makes demand relatively resilient even when prices rise.

However, elevated global uncertainty has complicated the picture this year.

gold prices surged earlier amid safe-haven buying linked to geopolitical tensions. At the same time, supply bottlenecks inside India pushed domestic premiums higher, leaving consumers paying above global benchmark prices despite some correction internationally.

Analysts say a sustained disruption in imports could create tighter domestic supply conditions ahead of peak festive demand, especially if prices soften and buying revives.

Metals Focus noted that the current slowdown remains manageable largely because this is traditionally a weaker season for jewellery demand. Risks, however, could rise significantly if purchases accelerate ahead of festivals and weddings later this year.

Stocks in focus

Jewellery stocks including Titan Company, Kalyan Jewellers India and Senco Gold are expected to remain in focus on Monday (May 11) following the Prime Minister’s remarks on gold purchases.

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