Prime Minister Narendra Modi on Sunday (May 10) appealed to the countrymen to buy gold, travel abroad and use public transport. After this, these issues became a topic of discussion in the entire country and the shares of gold related companies fell by 12 percent in the market. In the backdrop of the energy crisis arising from the current tensions in West Asia, Prime Minister Modi appealed to citizens not to buy gold for at least a year, avoid foreign trips and work from home wherever possible. What is the reason behind the Prime Minister’s appeal not to buy gold, remains the most discussed topic at the moment.
Not buying gold is directly related to the country’s foreign exchange reserves and reserve fund. Let us understand the mathematics behind this. According to Trading Economics data, India’s foreign exchange reserves are approximately $690.69 billion. According to RBI data, this reserve had reached a record level of about $ 728 billion in February, but due to global uncertainties it declined to about $ 691 billion in April.
On the other hand, the International Monetary Fund (IMF) estimates that India’s current account deficit (CAD) may increase to $ 84.5 billion by the year 2026, which will be about 2 percent of the country’s gross domestic product (GDP). A growing current account deficit means that dollars going out of the country are exceeding dollars coming into the country.
Gold is considered to be a major reason behind India’s increasing current account deficit. India imported gold worth about $72 billion in the financial year 2025-26, which is 24 percent more than the previous year. India is the second largest gold purchasing country in the world. Most of this gold is imported and payments for it are made in dollars.
India’s total import expenditure in FY 2026:
- Total Import: 775 billion dollars
- Import of Crude Oil: 134.7 billion dollars
- Gold Import: 72 billion dollars
- Edible Oil: 19.5 billion dollars
- Fertilizer: 14.5 billion dollars
- Foreign exchange reserves: Approximately $691 billion (April 2026)
According to statistics, gold alone accounts for about 10 percent of India’s total imports. At the same time, due to the ongoing war with Iran, crude oil prices are fluctuating between $105 to $120 per barrel. India imports 88 percent of its oil needs, putting already huge pressure on foreign exchange reserves.
If the countrymen accept the Prime Minister’s appeal and the demand for gold decreases, it will have a direct impact on India’s economy and government treasury. If gold imports are reduced by only 30 to 40 percent, India can save about $25 billion. If gold imports are reduced by 50 percent, there will be savings of about $36 billion. If the country stops buying gold completely for a year, then savings of about $72 billion are possible. In Indian currency this amount will be equivalent to approximately Rs 6.84 lakh crore.
If this happens, India’s current account deficit (CAD) may see a significant improvement. These savings could cover almost half of the projected current account deficit of $84.5 billion in 2026. In simple words, these dollars saved on gold can be used to meet crude oil, gas and other essential energy needs.
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