Buy Gold Or Save The Rupee? Why Modi Is Warning Indians Against Fresh Purchases

Prime Minister Narendra Modi’s renewed appeal on September 1 to Indians to avoid buying gold has once again brought the precious metal into focus.

It is also raising concerns in the jewellery industry, with shares of major retailers falling as investors assess the potential impact on demand ahead of the key festive and wedding season.

This is the second such appeal from the Prime Minister this year, highlighting the government’s concern over India’s large gold import bill and its impact on the country’s external finances.

How Much Gold Does India Import And Why?

India is among the world’s biggest consumers of gold, while domestic production remains negligible compared with demand. As a result, much of the gold used for jewellery and investment has to be sourced from overseas.

Gold imports rose more than 24% to a record $71.98 billion in FY26, from $45.54 billion in FY24 and $35 billion in FY23.

For Indian households, gold is more than jewellery. It is widely viewed as a financial asset and a store of value, particularly during periods of inflation or economic uncertainty.

How Do Gold Imports Affect The Rupee?

Higher gold imports increase demand for dollars because importers need foreign currency to pay for purchases. This can add pressure to India’s foreign exchange position.

The concern is particularly relevant when the country is already facing external pressures. The West Asia conflict has pushed up crude oil prices, while the rupee has also weakened, touching a record low of 96.96 against the dollar in May.

Gold imports also add to the trade deficit, as they increase the value of goods India purchases from abroad. A wider deficit can increase dependence on foreign capital and other sources of foreign exchange.

Reducing gold imports, therefore, could help conserve foreign exchange and ease some pressure on the rupee.

Why Is The Government Asking Indians To Buy Less Gold?

The government’s argument is that not all domestic gold demand needs to be met through fresh imports.

Gold already held by Indian households can potentially be recycled, sold or pledged against loans, allowing the metal to return to the financial and consumption cycle without requiring an equivalent amount of new imports.

The government has also taken policy measures to discourage imports, including raising import duties to 15% earlier this year and tightening import regulations.

Jewellery retailers have meanwhile introduced programmes aimed at encouraging customers to bring idle gold back into circulation.

Why Did Jewellery Stocks Fall?

The Prime Minister’s appeal could have a direct impact on jewellery demand, particularly if consumers postpone purchases or choose to recycle existing gold instead of buying new jewellery.

A similar reaction followed Modi’s earlier appeal in May to avoid buying gold for a year. Shares of major jewellery companies, including Titan, Kalyan Jewellers and Senco Gold, fell sharply, with some stocks declining as much as 10%.

The latest appeal again triggered selling. Titan Company fell 1.12% to ₹5,045.50, while Kalyan Jewellers declined 4.50% to ₹587.

The timing is significant because the period from September to February is crucial for jewellery retailers, covering the festive season and much of the wedding season.

How Can Lower Gold Demand Help India?

If consumers buy less newly imported gold and instead recycle existing holdings, India could reduce its requirement for fresh imports.

That would mean lower dollar demand, a narrower trade deficit and potentially less pressure on the rupee.

The challenge for the jewellery industry is that the same shift could reduce sales of new jewellery. For the government, however, encouraging gold recycling offers a way to curb impor