Modi's anti-gold campaign escalates as India's import bill hits $71.98B

India's record gold import bill is pushing the government from tariffs toward moral suasion — but culturally embedded demand may blunt the campaign's impact.

Prime Minister Narendra Modi issued his second anti-gold appeal this year, urging Indians to skip unnecessary purchases as the country's record $71.98 billion FY2025-26 import bill strains forex reserves and the rupee.

"If there is no need, then one should not even buy gold. The more we emphasise swadeshi, the more we emphasise self-reliance," Modi said in an Instagram reel on Tuesday, framing household consumption choices as central to the government's developed-India agenda.

India's gold imports rose 24 percent to an all-time high of $71.98 billion in FY2025-26, up from $58 billion the prior year, even as import volumes fell 4.76 percent to 721.03 tonnes from 757.09 tonnes. The divergence reflects a sharp surge in international gold prices, which pushed spot gold above $4,400 per ounce before Tuesday's 1 percent intraday drop to $4,399.45. Jewellery stocks slid on the appeal, with Titan Company falling 1.12 percent to ₹5,045.50 and Kalyan Jewellers dropping 4.50 percent to ₹587.

The appeal is the second this year — Modi first asked Indians to halt gold purchases for a year in May — and follows a May 2026 import duty hike from 6 percent to 15 percent that failed to curb import growth. With gold accounting for roughly a fifth of India's $333 billion merchandise trade deficit and the current account deficit running at about 1.3 percent of GDP, the government faces limited policy tools beyond moral suasion and tariff adjustments to rein in dollar outflows.

The import bill's trajectory shows the scale of the challenge. Gold imports have more than doubled in three years, from $35 billion in FY2022-23 to $71.98 billion in FY2025-26, with the jump driven almost entirely by price appreciation rather than demand growth. India imports over 90 percent of the gold it consumes, and every surge in purchases translates directly into dollar demand in the forex market, pressuring the rupee during periods of global uncertainty.

The May appeal triggered a sharper market reaction — Titan and Kalyan Jewellers fell 9 to 10 percent in a single session — while Tuesday's more muted decline suggests investors are pricing the campaign as sentiment-driven rather than structurally damaging. Kalyan Jewellers reported Q1 FY27 revenue up 46 percent year-on-year to ₹10,589 crore with same-store sales growth of 28 percent, and gold recycling now accounts for over 46 percent of its revenue — a strategic pivot that aligns with the government's import-reduction goals. HSBC maintained Buy ratings on both Titan and Kalyan Jewellers on August 31, with target prices of ₹5,550 and ₹770 respectively.

Cultural demand vs. policy intent

Gold in India is not merely an investment — it is embedded in wedding customs, religious ceremonies, and intergenerational wealth transfer. The government's own data shows that even the 900-basis-point duty increase in May failed to reduce import values, suggesting price elasticity is limited for culturally driven purchases. A complete halt to gold buying is unrealistic; a moderate reduction could still save billions in annual forex outflows. The government is reportedly discussing further import duty cuts on gold and silver, acknowledging that high tariffs have not achieved their intended effect.

The forward path depends on whether international gold prices moderate. If prices stabilize or decline, India's dollar-denominated import bill could ease without policy intervention. If prices continue climbing, the government may need to consider more aggressive measures — including expanded Sovereign Gold Bond programs — to channel investment demand away from physical imports.

This article is for informational purposes only and does not constitute investment advice.