India's Gold Import Bill: PM Modi's appeal is aimed at reducing India's gold import bill and conserving foreign exchange reserves. He made these remarks at an event in Hyderabad on Sunday.

The logic behind PM Modi's appeal not to buy gold

PM Modi's Appeal Logic: Prime Minister Narendra Modi recently issued an appeal that is being discussed nationwide. During an event in Hyderabad on Sunday, he said, "Stop buying gold for a year, postpone foreign travel, and work from home as much as possible." The reason for his statement is simple: save dollars and keep India's foreign exchange reserves secure.

His appeal comes amid the war in Iran, the resulting surge in crude oil prices and pressure on the rupee. The question now is: what's the connection between postponing gold purchases and maintaining the country's foreign exchange position? Let's understand the math. 
 

Understand the complete mathematics here

India's foreign exchange reserves stand at around $690.69 billion, according to data compiled by Trading Economics. RBI data shows that the country's foreign exchange reserves rose to around $728 billion in February, but fell again to around $691 billion in April due to increased global uncertainty.

Meanwhile, the IMF has estimated that India's current account deficit (CAD) could widen to $84.5 billion in 2026, representing approximately 2% of GDP. A rising CAD simply means that the amount of dollars going out of the country exceeds the amount coming in. Gold must be paid for in dollars, so large purchases of gold increase the current account deficit (CAD), and the increased demand for dollars weakens the rupee.

India imported gold worth approximately $72 billion in FY26, a 24% increase from the previous year. India is the world's second-largest buyer of gold. Most of this gold is imported, and every ounce is paid for in dollars.

• Total import bill in FY26: $775 billion
• Cost of just four items: $240+ billion
• Crude oil: $134.7 billion
• Gold: $72 billion
• Vegetable oil: $9.5 billion
• Fertilizer: $14.5 billion

These four items account for 31.1 percent of India's total imports. Gold alone accounts for nearly 10 percent of the total import bill. This is why PM Modi has urged citizens to reduce their consumption of these items.

What will happen if the demand for gold decreases?

If gold purchases are reduced over the next year, India could save up to $20-25 billion in gold imports. A 50% drop in gold imports could save up to $36 billion. This is almost half of the estimated CAD (current account deficit).

Simply put: not buying gold for a year could directly reduce dollar outflows from India by several billion dollars. At a time when crude oil is above $100 per barrel and India imports 88% of its oil needs, these dollars saved are significant. They can be used to pay for essential energy imports.