No Gold Purchases To Hit $80 Bn Industry, Livelihood Of 5 Million People
“Gold purchases are another area where foreign exchange is used extensively. In the national interest, we must resolve not to purchase gold for a year”: Prime Minister Narendra Modi
CHENNAI: Prime Minister Narendra Modi has appealed to the people not to buy gold for one year to protect forex reserves amid rising crude prices and unrelenting war in West Asia. While lesser gold consumption will help curb forex outgo, the livelihood of 5 million people working in the $80 billion gold and jewellery industry will be jeopardised and lakhs of investors will be deprived of the opportunity to hedge inflation risk and preserve wealth.
“Gold purchases are another area where foreign exchange is used extensively. In the national interest, we must resolve not to purchase gold for a year,” he said.
An appeal to make no purchases will hit the $80 billion industry and the livelihood of 5 million workers and artisans employed in this industry, including those in manufacturing, trade, wholesale and retail.
India's gems and jewellery market is valued around massive $85 billion and 80 per cent of this comprises gold. Of India’s $28 billion gems and jewellery exports, around $12 billion comprises studded gold and plain jewellery.
“The gems and jewellery exports are already struggling with US tariffs and the West Asia war. Curbs on consumption in the domestic market will further worsen the situation of the people depending on the industry,” said Vipul Shah, former chairman, GJEPC.
Further, for lakhs of Indian investors, gold is a hedge against inflation, that is rising due to crude prices, rupee weakening to record lows on a regular basis. Gold and silver have been the two best performing assets with gold appreciating 61 per cent and silver 128 per cent in FY26.
In the March quarter, India consumed 151 tonnes of gold, valued Rs 2,27,530 crore and of this, 82 tonnes went towards investment demand, which clearly shows how investors use gold as an asset.
“Looking from an investor’s standpoint, this is not the best thing to do. Gold is not just an inflation hedge; it also preserves wealth at difficult times. The global uncertainties are forcing individuals similar to the country to look for ways to preserve wealth. The appeal is not likely to be effective without giving investors alternative avenues to preserve their wealth,” said Anil Rego, founder, Right Horizons.
According to Aditi Nayar, chief economist, ICRA, measures to moderate demand for fuels while prices are elevated, would certainly help to contain the increase in the Current Account Deficit. “With a feared EL Nino, rural demand for gold may anyway be muted this year,” she said.
In the baseline scenario, presuming crude oil averages U$85/barrel in FY2027, India's CAD would jump to 1.7 per cent of GDP. If crude oil averages a higher $105/barrel, then the CAD would be even wider at 2.4% of GDP, finds ICRA.
Meanwhile, GTRI urged the government to review its FTA policies, especially tariff concessions on precious metal offered to Dubai under the India-UAE trade deal, which it says have significantly contributed to the recent surge in gold imports. India’s gold bar imports from the UAE rose from $2.9 billion in 2022 to $6.7 billion in 2023 and further to $16.5 billion in 2025.
