By Admin 
- Prime Minister Modi urged people to stop buying gold to save dollars.
- The rupee is under pressure due to Iran war and rising oil prices.
- Heavy gold imports increase the current account deficit and weaken the rupee.
- By reducing the purchase of gold, the country will save billions of dollars.
PM Modi’s Appeal Logic: Prime Minister Narendra Modi has recently made such an appeal, which is being discussed in the entire country. During an event in Hyderabad on Sunday, he said, “Do not buy gold for a year, postpone foreign travel and work from home as far as possible.” There is a simple reason for saying this – save dollars, keep India’s foreign exchange reserves secure.
His appeal has come amid the war in Iran and the resulting increase in crude oil prices and pressure on the rupee. Now the question comes that what is the connection between postponing the purchase of gold and maintaining the country’s foreign exchange position? Let us understand the complete mathematics.
Understand the complete mathematics here
According to data compiled by Trading Economics, India’s foreign exchange reserves are approximately $690.69 billion. RBI data shows that the country’s foreign exchange reserves increased to about $728 billion in February, but due to increased global uncertainty in April, it again declined to about $691 billion.
Meanwhile, IMF has estimated that India’s current account deficit (CAD) may increase to $ 84.5 billion in 2026, which will be about 2 percent of GDP. The increase in CAD simply means: more dollars going out of the country than dollars coming into the country. Actually, payment for gold has to be made in dollars, hence purchase of gold in large quantities increases the current account deficit (CAD) and due to increase in demand for dollars, the rupee weakens.
In FY 26, India imported gold worth about $72 billion, which is 24 percent more than the previous year. India is the world’s second largest buyer of gold. Most of this gold is imported and payment for every ounce is made in dollars.
- Total import bill in FY26: $775 billion
- Cost of just four items: $240+ billion
- Crude oil: $134.7 billion
- Gold: $72 billion
- Vegetable oil: $9.5 billion
- Fertilizer: $14.5 billion
These four things constitute 31.1 percent of India’s total imports. Gold alone is about 10 percent of the total import bill. This is why PM Modi has urged citizens to reduce the use of these things.
What will happen if the demand for gold decreases?
If there is a reduction in gold purchases for the next one year, India can save up to $20-25 billion in gold imports. A 50 percent decline in gold imports can save up to $36 billion. This is almost half of the estimated CAD (current account deficit).
In simple words: not buying gold for a year can directly reduce the outflow of dollars from India by several billion dollars. At a time when crude oil is above $ 100 per barrel and India imports 88 percent of its oil needs, these dollars saved matter a lot. These can be used to pay for essential energy imports.
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