Gold Imports: Modi’s 1-Year Pause Call to Ease Rupee

Why the Prime Minister’s message matters now

Prime Minister Narendra Modi’s call for Indians to cut discretionary spending on imported items, especially gold, has come at a time when India’s external buffers are visibly under pressure. The appeal gained prominence against a backdrop of falling foreign exchange reserves and a weakening rupee. Addressing a rally in Hyderabad on May 10, Modi urged citizens to postpone gold purchases and foreign travel for a year. He also asked people to reduce petroleum consumption and lean on habits used during Covid-19 such as work-from-home and virtual meetings.

The context is shaped by heightened uncertainty tied to the West Asia conflict. Rising crude oil and fertiliser prices and supply chain disruptions have increased pressure on India’s import bill. At the same time, global demand for dollars has strengthened, adding stress to currencies like the rupee.

What RBI data shows on reserves and the rupee

Reserve Bank of India (RBI) data show India’s forex reserves fell by about 5% in a little over two months. Reserves declined from around $128.5 billion on February 27 to nearly $190.7 billion by May 1. The rupee also weakened by more than 5%, falling from 91.06 per dollar to about 96 as on May 13, making it the worst-performing Asian currency so far this year.

Foreign currency assets (FCA), the largest component of reserves, declined from nearly $173 billion in late February to around $152 billion by May 1. The reported fall reflects pressure from external payments and stronger global demand for dollars amid uncertainty in global markets. RBI intervention to stabilise the currency has also been part of the backdrop.

Gold’s double impact: import outflow and valuation effect

Gold has featured in this episode in two different ways. First, higher gold imports increase dollar demand because importers need dollars to pay overseas suppliers. Second, the valuation of RBI’s existing gold holdings can move with global prices.

During the same period when reserves fell, global gold prices declined 11.50%. This reduced the valuation of the RBI’s gold holdings by nearly 13%, amplifying the headline decline in reserves.

The scale of India’s gold imports in FY26

Gold imports are a large and visible part of India’s import bill. In FY26, India imported about $12 billion worth of gold, accounting for nearly 10% of the country’s total import bill. The gold import bill almost doubled from $15 billion in 2022-23.

Commerce Ministry data cited in the report also indicated gold imports rose 24% to an all-time high of $11.98 billion in 2025-26, compared with $18 billion in 2024-25. Record high prices have dampened demand, and India’s gold imports in 2026 are expected to fall below the typical 700 to 800 tonnes annual average.

What Modi asked citizens to do

Modi’s message focused on conserving foreign exchange by curbing non-essential outflows. He urged citizens to avoid buying gold for one year, postpone discretionary foreign travel, and reduce fuel consumption. He also encouraged domestic tourism and the use of public transport, alongside work-from-home where possible.

Separate commentary included that the prime minister referenced overseas weddings and vacations as avoidable foreign exchange spending. The broader framing was austerity in non-essential imported consumption during a period of external stress.

Policy signals and measures under discussion

Alongside the public appeal, the broader policy environment has included discussions on additional steps. India is considering emergency measures to shore up reserves, including hiking fuel prices and curbing non-essential imports such as gold and consumer electronics, according to people familiar with the matter cited in the report. Officials in the Prime Minister’s Office and Finance Ministry reportedly held discussions with the RBI, with no final decisions stated.

One report said the government hiked the import duty on gold and silver from 6% to 15% from midnight to discourage imports. Separately, the RBI has taken measures to support the rupee, including limiting banks’ daily open positions to $100 million to curb speculation. It also asked lenders to stop offering non-deliverable forwards to non-residents, though that step was later withdrawn. Other possible steps mentioned included changes to currency hedging rules for importers and asking exporters to repatriate dollars immediately upon receipt.

Current account deficit, FII outflows, and other stress points

The external sector pressures described were not limited to gold. The report listed rising crude oil import bills, outward remittances under the Liberalised Remittance Scheme (LRS), and geopolitical uncertainty as key drivers. It also cited sustained capital outflows from foreign institutional investors (FIIs) as an additional headwind.

Between January and May 2026, FIIs reportedly withdrew around Rs. 1.97 lakh crore from Indian markets. RBI data cited in the report also said India’s current account deficit (CAD) widened to $13.2 billion, equivalent to 1.3% of GDP, during the December quarter of 2025.

Market impact: why gold restraint is being discussed

Gold is widely held in India and has a cultural and financial role, which is why the appeal drew attention. But the economic linkage is straightforward: higher gold imports increase the need for dollars, which can pressure the rupee and drain forex reserves. During geopolitical crises, the pressure can intensify because oil import costs can also rise at the same time.

The report noted that reserves of $190.7 billion were enough to cover about 10 to 11 months of imports. Another passage noted oil above $100 per barrel at the time, while a separate note referenced an expectation of crude averaging $15 for the year. Against this backdrop, policymakers have highlighted gold as one of the most addressable non-essential import categories.

Key figures at a glance

Analysis: what the appeal can and cannot do

Modi’s appeal is not described as a legal restriction or a ban on gold purchases. The message is framed as a voluntary economic appeal aimed at conserving foreign exchange during a period of heightened external risk. That distinction matters because gold demand in India spans jewellery, savings, and investment, and policy outcomes depend on whether demand shifts materially.

Industry suggestions in the report included strengthening the Gold Monetisation Scheme (GMS) to mobilise idle household gold and reduce reliance on imports. Another point raised was the potential revival of sovereign gold bonds to offer an alternative to physical gold. The macro rationale is to reduce dollar outflow from gold imports when reserves, the rupee, and the current account are under pressure.

Conclusion

The appeal to postpone gold purchases for a year is anchored in a specific macro moment: falling forex reserves, a weaker rupee, elevated import costs, and capital outflows. RBI data show reserves slipping from about $128.5 billion in late February to nearly $190.7 billion by May 1, while gold imports reached roughly $12 billion in FY26.

What happens next depends on confirmed policy steps and the extent of voluntary restraint in discretionary imports and overseas spending. The report indicates officials are discussing measures with the RBI, but also notes that no final decisions have been made.