PM Modi Urges Citizens to Delay Gold Purchases to Strengthen Economy
PM Modi's Call to Action
On Sunday, Prime Minister Modi urged the public to postpone their gold purchases to bolster the economy. In recent years, India has witnessed a significant surge in gold imports. In the fiscal year 2025-26, gold imports soared by over 24%, reaching a staggering $71.98 billion. This figure was $58 billion in 2024-25, $45.54 billion in 2023-24, $35 billion in 2022-23, $46.14 billion in 2021-22, $34.62 billion in 2020-21, and $28.2 billion in 2019-20. Such high levels of gold imports exert pressure on the country's trade deficit and foreign exchange expenditure.
Impact on Trade Deficit
The trade deficit escalated to $333.2 billion in 2025-26, adversely affecting the current account deficit as well. India stands as the world's second-largest gold consumer after China. The government has imposed restrictions on the import of gold, silver, and platinum products to prevent the misuse of free trade agreements. Some traders have been exploiting lower tax jurisdictions to increase imports from countries like Thailand under the guise of uncut jewelry, which is clearly impacting the government treasury.
India's Position in Global Gold Consumption
India is primarily driven by the jewelry industry when it comes to gold imports. During times of global uncertainty, gold is perceived as a safe investment, leading to increased demand. According to the Ministry of Commerce, the rise in gold imports is largely attributed to soaring prices, which jumped from $76,617.48 per kilogram in 2024-25 to $99,825.38 per kilogram in 2025-26. In the national capital, gold prices hover around ₹1.5 lakh per 10 grams, having crossed the ₹1 lakh mark for the first time in April of the previous year.
Consequences of High Gold Imports
Excessive gold imports place a strain on the trade deficit and foreign currency expenditure. The current account deficit rose to $13.2 billion in the October-December quarter, with gold accounting for over 9% of total imports. India's total imports for 2025-26 reached $775 billion.
Sources of Gold Imports
Switzerland is the largest source of gold for India, followed by the United Arab Emirates and South Africa. During 2025-26, total imports from Switzerland increased by 11.36% to $24.27 billion.
Strategies to Reduce Gold Imports
The government has implemented controls on the import of gold, silver, and platinum products to curb the misuse of free trade agreements. In 2022, the import duty was raised from 10.75% to 15%, but in the 2024-25 budget, it was reduced to 6% to support the jewelry industry and reduce smuggling.
Expert Opinions
The Global Trade Research Initiative has urged the government to review free trade agreements, particularly the concessions granted under the India-UAE trade agreement. This agreement allows gold imports from the UAE at a rate 1% lower than the standard duty. The quota is set to increase from 120 tons to 200 tons by 2027. According to Ajay Srivastava, founder of GTRI, after the duty reduction in 2024, gold arriving from Dubai effectively incurs only a 5% duty.
Rising Gold Imports from UAE
Gold imports from the UAE have surged rapidly, reaching $2.9 billion in 2022, $6.7 billion in 2023, and projected to hit $16.5 billion in 2025. Before the FTA, Dubai accounted for 7.9% of India's gold imports, which is expected to rise to 28% by 2025. Srivastava expressed concern over this trend, noting that the UAE neither mines gold nor conducts significant processing, suggesting that much of the trade involves gold being routed through Dubai from third countries to take advantage of India's lower tariffs. GTRI has recommended stricter regulations, a review of concessions, and the exclusion of gold, silver, platinum, and diamonds from future trade agreements to protect India's trade balance and foreign exchange reserves.