- Prime Minister Modi urged citizens to avoid buying gold for a year to save dollars
- India's forex reserves slipped to around $691 billion amid rising global uncertainty
- India imported $72 billion of gold in FY26, nearly 10% of total import bill
Prime Minister Narendra Modi has made an appeal that has the entire nation talking. To put it crudely, he said: "don't buy gold for a year; postpone foreign travel; work from home where possible."
His message is simple: Save dollars, protect India's foreign exchange reserves. His appeal comes amid the ongoing Iran war, and the resultant rise in crude oil prices, and pressure on the rupee.
But how exactly does skipping gold purchases help India's forex position? The answer lies in the math.
India's Forex Math
India's forex reserves are around $690.69 billion, according to data compiled by Trading Economics. RBI data shows reserves rising close to $728 billion in February before slipping back to around $691 billion in April as global uncertainty intensified.
At the same time, the IMF has projected that India's current account deficit (CAD) could widen to $84.5 billion in 2026, roughly 2 per cent of GDP. A widening CAD means one thing: more dollars going out than coming in.
And gold is a big reason for that. India imported about $72 billion worth of gold in FY26 -- this is a 24 per cent jump from the previous year.
In fact, India is the world's second-largest gold buyer. Most of this gold is imported. And every ounce is paid for in dollars. Now look at the broader import picture.
- Total import bill in FY26: $775 billion
- Four commodities alone cost: $240+ billion
- Crude oil: $134.7 billion
- Gold: $72 billion
- Vegetable oils: $19.5 billion
- Fertilisers: $14.5 billion
These four items form 31.1 per cent of India's total imports. Gold alone is nearly 10 per cent of the total import bill. This is why PM Modi has urged citizens to reduce the use of these commodities.
What Happens If Gold Demand Drops?
If Indians reduce gold purchases sharply for a year:
- Even a 30-40% fall in gold imports can save $20-25 billion
- A 50% fall can save $36 billion
- That is nearly half of the projected CAD
In simple terms: Not buying gold for a year can directly reduce India's dollar outflow by tens of billions.
At a time when crude oil is above $100 per barrel and India imports 88 per cent of its oil needs, those saved dollars matter. They can be used to pay for essential energy imports instead.
Why This Matters More During The US-Iran War
The conflict has disrupted shipping through the Strait of Hormuz, a critical oil route. Oil prices have surged. The rupee has weakened. Follow Markets Live Updates
Gold, meanwhile, behaves like a "safe haven". When wars happen, people rush to buy gold. Prices rise. Imports rise. Dollar outflow rises. So, India faces a double pressure:
- Costlier oil imports
- Rising gold imports at higher prices
That combination hurts forex reserves and the rupee. Every gold purchase means an importer buys dollars from the market.
- More demand for dollars = weaker rupee.
In contrast, a pause in gold buying means:
- Lower dollar demand
- Less pressure on the rupee
- Lower stress on RBI reserves
Siddharth Maurya of Vibhavangal Anukulkara says this should be seen as a defensive economic strategy, not panic. India is one of the largest gold buyers, and gold imports directly eat into forex reserves during crises.
Where Citizens Can Invest Instead
Abhishek Bhilwaria, AMFI-registered MFD, suggests shifting from physical gold to financial options. Instead of locking money in jewellery or bullion:
- Invest through SIPs
- Use Gold ETFs to track prices digitally
- Keep money within the Indian financial system
- This keeps capital productive without creating dollar outflow.
Gaurav Garg of Lemonn Markets Desk notes that gold prices recently slipped even as oil surged, showing how inflation fears and interest rate expectations are limiting gold's rally despite geopolitical tensions. Crude has jumped sharply after US rejection of Iran's proposal, worsening inflation and energy security fears.
Which Other Sectors Felt The Impact Of PM Modi's Speech
PM Modi's appeal to curb spending isn't just about gold. It has triggered reactions across several key sectors of the economy.
Travel & airlines: Airlines and travel-related stocks have cooled off. With people being urged to postpone overseas travel and destination weddings, demand for tickets and holiday packages is likely to soften, affecting airlines, travel agencies and hospitality chains. Analysts have flagged this sentiment weakness in markets.
Hotels & hospitality: Luxury hotels and resorts, especially those that benefit from foreign tourists and destination weddings, have also felt pressure. Reduced foreign travel means lower occupancy and weaker demand for associated services.
Petroleum & fuel-linked sectors: PM Modi's call for lower fuel use, more public transport and revived work-from-home signals weaker demand for oil products. That has reverberated in petroleum company stocks, which lagged on market trading as investors anticipate slower volume growth.
Fertiliser & edible essentials: PM's speech also touched on cutting back edible oil and chemical fertiliser usage as part of reducing imports. While this is more policy guidance than regulation, sectors involved in these imports may see cautious business planning and slower growth expectations.
