No wedding jewellery purchases. No festive shopping during Diwali. No gold coins as gifts. No panic buying during market volatility. It may sound unrealistic in a country where gold is deeply tied to weddings, traditions and family savings.
But Prime Minister Narendra Modi’s recent appeal asking Indians to has suddenly turned that hypothetical into a serious economic conversation.
Amid rising crude oil prices and tensions in West Asia, PM Modi urged Indians to reduce fuel consumption, avoid unnecessary foreign travel and postpone non-essential gold purchases as the government looks to manage pressure on India’s import bill and current account deficit (CAD).
And the timing matters. India’s gold imports have surged sharply after last year’s customs duty cut, even as rising crude oil prices threaten to widen the country’s trade deficit and pressure the rupee again.
India earns dollars through exports, remittances and services such as IT. But it also spends dollars importing crude oil, electronics and gold.
When the money flowing out exceeds the inflows, the gap becomes the current account deficit, or CAD.
India’s CAD for FY2025 is estimated at around 0.9–1.1% of GDP, or roughly $28–32 billion, according to Akshat Garg, Head – Research & Product at Choice Wealth Private Limited.
That is higher than FY2024’s relatively comfortable 0.7% of GDP, showing how pressure on India’s external balances is beginning to rise again.
The concern has intensified after Brent crude prices surged above $105 per barrel following fresh uncertainty surrounding the US-Iran conflict and fears over disruptions in the Strait of Hormuz, one of the world’s most important oil shipping routes.
India imports more than 85% of its crude oil requirements, which means every rise in global oil prices directly increases the country’s dollar outflow.
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Gold is now one of India’s biggest import concerns after crude oil.
According to Garg, India’s gold imports are estimated at roughly $58–60 billion in FY2025, among the highest levels ever recorded.
That marks a sharp jump from $45.5 billion in FY2024. The surge came after the Union Budget of July 2024 slashed customs duty on gold from 15% to 6%, triggering a sharp rise in imports.
“Gold now accounts for roughly 8–10% of India’s total merchandise import bill and contributes nearly one-fifth of the country’s overall trade deficit,” Garg said.
India’s overall merchandise trade deficit for FY2025 is estimated at roughly $280–285 billion.
Three categories dominate that import bill:
1) Crude oil and petroleum
2) Electronics and semiconductors
3) Gold imports worth nearly $58–60 billion
“These three alone account for over 60% of India’s total import bill,” Garg said.
Even though import volumes have not exploded proportionately, the overall import bill has surged because of elevated global gold prices.
Economists say the impact could be significant, at least in the short term.
Manoranjan Sharma, Chief Economist at Infomerics Ratings, said gold imports are among India’s largest non-oil imports and a sharp fall in purchases could meaningfully reduce pressure on the economy’s external balances.
“If Indian households stop buying gold for a year, the current account deficit would narrow sharply,” he said.
According to Sharma, a lower current account deficit would ease external financing pressures, improve investor confidence and strengthen the rupee.
A stronger rupee could also reduce pressure on imported inflation because India buys many commodities, including crude oil, in dollars.
“Gold imports require large foreign exchange outflows. A lower CAD would reduce the need for RBI intervention and help preserve forex reserves,” Sharma explained.
Garg believes a meaningful reduction in gold imports could compress India’s current account deficit back towards 0.4–0.6% of GDP, a much more comfortable zone for policymakers.
According to Garg, gold imports also create structural pressure on the rupee because every gold shipment increases dollar demand.
“With nearly $58 billion flowing out for gold imports in FY2025, the pressure is significant,” he said.
The rupee had touched an all-time low of around 95.43 against the US dollar earlier this month amid oil price pressures, capital outflows and rising import demand.
It is worth noting that India’s foreign exchange reserves had peaked at $704.9 billion in September 2024 before falling sharply as the RBI intervened repeatedly to stabilise the currency.
According to Garg, reserves fell to around $620–625 billion by January 2025 before recovering partially later.
“Lower gold imports reduce the structural dollar drain that forces the RBI to intervene repeatedly,” he said.
The inflation impact is indirect but important. A weaker rupee raises the cost of importing crude oil, electronics and industrial raw materials. Garg estimates that every 1% fall in the rupee adds roughly 10–15 basis points to wholesale inflation over time.
Economists say the bigger question is not whether Indians stop buying gold. It is where that money goes instead.
Would households move those savings into mutual funds, fixed deposits and equities? Would they spend more on consumption instead? Or would they simply postpone purchases and eventually buy gold later anyway?
Garg said India’s household savings pattern is already shifting away from physical assets towards financial products.
The share of physical assets in household savings has dropped from roughly 55% in 2012 to around 38–40% today. At the same time, SIP inflows into mutual funds crossed Rs 25,000–26,000 crore per month by early 2025, while demat accounts crossed 18 crore.
“If even 20% of India’s annual gold spending shifts towards equities and mutual funds, it deepens capital markets, lowers the cost of capital for Indian businesses and structurally strengthens the financial system,” Garg said.
Some of that money could also move towards real estate, especially among households that traditionally view property and gold as competing stores of wealth.
“A sustained decline in gold appetite could give housing demand another leg up,” Garg said.
A portion of household savings could also shift towards consumption, travel and discretionary spending, supporting economic growth and GST collections.
That may be easier said than done.
Gold is deeply embedded in Indian culture and household finances. Weddings, festivals and family savings often revolve around gold purchases.
That is why many market experts believe PM Modi’s remarks may influence sentiment temporarily but are unlikely to fundamentally alter India’s long-term relationship with gold.
The stock market, however, reacted quickly to the comments. after investors began assessing whether weaker gold demand could affect sales during the wedding and festive season.
Some analysts also pointed out that India’s gold demand has historically remained resilient unless accompanied by policy measures such as import duty hikes or tighter restrictions.
Garg pointed out that India’s relationship with gold contains a deeper economic paradox.
“Indians buy more gold when they fear inflation and currency weakness. But that behaviour itself widens the current account deficit and puts further pressure on the rupee,” he said.
That creates a cycle policymakers have struggled with for decades.
India faced similar stress during the 2012-13 period when surging gold imports and a widening current account deficit triggered severe pressure on the rupee.
“Back then, gold imports hit $56 billion and the rupee crashed from 55 to 68 against the dollar within months,” Garg said.
Today, India’s buffers are much stronger than they were in 2013. Forex reserves are larger, remittances are higher and services exports provide a much bigger cushion.
But the structural vulnerability remains the same: heavy dependence on imported oil and gold.
That is also why PM Modi’s message should not be viewed only as a warning against gold purchases.
Instead, economists see it as part of a broader effort to reduce non-essential dollar outflows at a time when expensive crude oil is threatening to sharply increase India’s import bill.
And perhaps that is the real question behind Modi’s appeal.
“The billion-dollar question is not whether Indians should stop buying gold,” Garg said.
“It is whether India can create financial instruments compelling enough that households remain invested in gold without the metal ever leaving the country.”