Explained: Why PM Modi asked Indians to avoid buying gold for a year and what it means for prices

Prime Minister Narendra Modi called on Indians to avoid purchasing gold and limit foreign travel to protect the country’s foreign exchange reserves, which have declined due to rising import costs. His appeal follows a $7.794 billion drop in reserves to $690.693 billion in early May, driven by geopolitical tensions in West Asia and sustained pressure on the rupee. India’s gold imports jumped 24% in 2025-26 to a record $71.98 billion, contributing significantly to the trade deficit, which reached $333.2 billion. The country typically imports 700–800 tonnes of gold annually, meeting over 90% of domestic demand, a major strain on foreign currency reserves. Modi’s request also targets reduced consumption of petrol, diesel, and chemical fertilizers to curb fuel imports, as crude oil prices remain high due to the ongoing US-Israel-led conflict in Iran’s third month. A 10% rise in crude prices cuts India’s economic growth by 15 basis points and lifts inflation by 30 basis points, according to the Reserve Bank of India. Analysts view the appeal as a crisis management response to the current account deficit, with gold imports exacerbating pressure on the rupee. Jewellery stocks like Titan, Kalyan Jewellers India, and Sky Gold fell by up to 12% following Modi’s speech, reflecting market reaction to the reduced demand for physical gold. The RBI’s intervention through dollar sales has helped stabilize the currency, but sustained high crude and gold prices pose long-term risks. Experts emphasize that Modi’s message prioritizes macroeconomic stability and import management amid global uncertainty.