PM Modi's Call To Cut Gold Imports May Cause Over 10 Million Indians Losing Jobs

Instead of reducing gold buying for one year, industry experts suggest having more transparent and timely discussions to ease concerns over rising pressure on India's dollar reserve

By: Nithin Belle

Indian Prime Minister Narendra Modi's seven-point suggestion to Indians to tackle the ongoing global crisis - triggered by the war in the Middle East -has had an overwhelming response on social media with comments equally divided among those backing him and others opposed to his policies.

His suggestion to Indian consumers to avoid buying gold for a year, however, has not gone down well with consumers and the industry.

Recommended For You

Rajesh Rokde, chairman, All India Gems and Jewellery Domestic Council (GJC), warned that Modi's advise to consumers to not buy gold for a year to conserve foreign exchange could threaten the livelihood of over 10 million people working in the jewellery sector.

Stay up to date with the latest news. Follow KT on WhatsApp Channels

Rokde noted: "Indians are estimated to hold about 50,000 tonnes of gold at home; even if 10 to 20 per cent of that is bought under the government's gold monetization scheme (GMS), the country may not have to import gold for a decade."

India is the world's second-largest buyer of gold, most of which is imported. In the last financial year, it imported $72 billion worth of gold, an almost 25 per cent jump over the previous year's figures and accounting for 10 per cent of its total import bill.

India imports over 90 per cent of the gold that is consumed and more than 85 per cent of its crude oil. Every year, India consumes almost 800 tonnes of gold, the bulk of it imported. Governments have in the past intervened by restricting gold imports and hiking import duties on the yellow metal. The country's foreign exchange reserves fell by $7.7 billion earlier this month, and stands at $690 billion.

Avinash Gupta, vice-chairman, GJC, pointed out that a strong and regulated GMS could help reduce imports, ease economic pressures and draw the thousands of tonnes of gold lying idle into the formal financial system. Existing gold should be used more efficiently and policies should be pragmatic so that the country will benefit.

One social media user, however, commented:“@narendramodi certainly you asked people not to buy gold jewellery for 1year, but what about for more then 4 million people who are employed in gold jewellery sector?”

Spell out the full situation

Akshat Pande, managing partner, Alpha Partners, told the media Modi's appeal to avoid buying gold“appears to stem from concerns over rising pressure on India's foreign exchange reserves due to high crude oil prices, global geopolitical tensions, and heavy gold imports, all of which can weaken the rupee and increase inflation.”

"If the government genuinely anticipates a serious economic or external crisis, it would be better to clearly spell out the full situation to the public, much like it did during the Covid period, so that citizens and businesses can prepare mentally, financially, and logistically instead of relying on indirect hints and advisories, Pande underscored.

“If restrictions on foreign exchange usage, gold purchases, or non-essential fuel consumption may eventually become necessary, a transparent and timely policy approach would be preferable to vague warnings, as uncertainty itself creates speculation, disrupts businesses, and can negatively impact investor confidence and stock markets," he added.

Jateen Trivedi of LKP Securities said that given the deep links between gold and savings and investments of Indians, Modi's suggestion is unlikely to change the country's appetite for gold.

Sameer Dalal, a stockbroker, told the media that consumers are unlikely to change based on such suggestions as gold buying is closely linked to weddings and traditions.

Manoranjan Sharma, Chief Economist at Infomerics Ratings, said a sharp fall in gold purchases, could reduce pressure on the economy's external balances, as the yellow metal accounts for the largest share of non-oil imports.“If Indian households stop buying gold for a year, the current account deficit would narrow sharply,” he told reporters.“Gold imports require large foreign exchange outflows.

Akshat Garg, research head at Choice Wealth, added:“Indians buy more gold when they fear inflation and currency weakness. But that behaviour itself widens the current account deficit and puts further pressure on the rupee, and governments have for decades struggled with this crisis."

'Patriotic duty'

On Sunday, Modi urged Indians to resolve not to buy gold for a year in a bid to conserve foreign reserves, following the ongoing war in the Middle East and economic uncertainty that it has triggered around the globe.

He also told his compatriots to reduce fuel consumption, postpone non-essential foreign travel, opt for public transport, reduce dependence on imported products and wherever possible revert to work-from-home practices.

He made a seven-point plea to Indians in view of the ongoing crisis:

Prioritise work from home wherever possible
Avoid buying gold for a year
Reduce petrol and diesel consumption and use metro/public transport

Cut down the use of cooking oil

Reduce dependence on chemical fertilisers and move towards natural farming

Use fewer foreign-branded products and adopt 'swadeshi' (indigenous) products

Avoid foreign travel for a year

"Patriotism is not only about the willingness to sacrifice one's life on the border, In these times, it is about living responsibly and fulfilling our duties to the nation in our daily lives," Modi said.

The prime minister reminded Indians to revert to habits last adopted during the Covid-19 pandemic.“We must prioritise work-from-home, online conferences and virtual meetings again,” he said.

Modi also referred to the growing culture among the middle class of having weddings abroad, and vacationing overseas.“We must decide during this time of crisis to postpone travelling abroad for at least year,” he said.

Referring to the consumption of edible oil, he urged Indians to reduce it as it would help both their personal and the country's economic health.

Similarly, he said reducing the use of chemical fertilisers by 50 per cent and adopting natural farming practices would reduce imports and also protect the soil. Solar-powered irrigation pumps could replace diesel-powered ones, he added.

ALSO READ
Indian markets tumble; jewellery stocks sink after Modi's advice on not buying gold Modi urges Indians to limit buying gold, fuel use and travel to save forex India's Modi to begin five-nation tour, including UAE, amid Middle East conflict

MENAFN11052026000049011007ID1111099797