Gold Imports – India Faces Fresh Debate Over Rising Bullion Dependence
Gold Imports – Prime Minister Narendra Modi’s recent remarks urging citizens to avoid excessive gold purchases have once again brought attention to India’s growing reliance on imported bullion. The discussion has intensified as official estimates indicate that the country’s gold imports may reach nearly $72 billion during the 2025–26 financial year, raising concerns over pressure on foreign exchange reserves and the rupee.
Gold Continues To Hold Cultural And Financial Importance
Despite the Prime Minister’s appeal, experts within the bullion industry believe consumer behaviour is unlikely to change significantly. According to market observers, gold buying in India is deeply linked to traditions, weddings, savings habits and long-term financial security rather than short-term economic advice.
Rajesh Agarwal, who closely follows the bullion trade, said demand for gold is often driven by family obligations and emotional value. He noted that households purchasing jewellery for weddings or future security are unlikely to stop buying because of public appeals.
Industry participants also point out that many Indian families continue to view gold as a dependable financial asset that can be used during emergencies. Unlike luxury spending, gold ownership is often considered a form of protection against uncertain economic conditions.
Jewellery Demand Weakens Amid High Prices
Traders say the jewellery market had already been witnessing slower sales before the Prime Minister’s comments were made public. Rising gold prices, uncertain market movements and cautious household spending have all contributed to weaker consumer demand in recent months.
According to estimates from the trade, gold jewellery sales have dropped sharply, with some market participants suggesting declines of nearly 70 percent in certain segments. Silver jewellery demand has also reportedly weakened by around 20 to 30 percent during the same period.
However, investment-linked demand has remained relatively stable. Investors continue to show interest in Gold Exchange-Traded Funds, commonly known as ETFs, as they seek safer investment options amid inflation concerns and global uncertainty. Analysts believe ETF inflows may continue to rise if market volatility persists.
Government Tightens Import Duty Measures
As bullion imports continued to increase, the central government recently raised import duties on gold and silver to 18 percent. The move marked a reversal from earlier policy decisions that had reduced duties in an effort to control smuggling and stabilise domestic prices.
Market experts believe the earlier duty cuts may have unintentionally encouraged higher imports instead of reducing them. Increased buying activity reportedly added pressure on India’s currency and widened concerns over trade imbalances.
At the same time, traders have warned that steep import duties could revive illegal smuggling channels if domestic prices move too far above international rates. Industry members say policymakers will need to balance revenue generation with market stability.
Industry Suggests Alternative Settlement Mechanism
Some financial experts believe the focus should shift from discouraging consumer demand to changing the way India settles bullion imports internationally.
Financial analyst Prem Soni has proposed a sovereign gold-backed digital settlement model aimed at reducing dependence on the US dollar. Under the proposed system, authorised refiners and bullion dealers would settle transactions using tokenised institutional gold inventories instead of dollar-based payments.
Currently, Indian importers buying gold from countries such as Switzerland and the United Arab Emirates must first convert rupees into US dollars before completing purchases. Supporters of the proposal argue that a digital settlement framework could help reduce annual dollar outflows linked to bullion trade.
Industry representatives clarified that the proposal is not connected to household jewellery deposits or surrender schemes. Instead, it would focus only on institutional bullion inventories already operating within the supply chain.
Silver Market Faces Fresh Uncertainty
Alongside gold, silver imports have also witnessed strong growth in recent months, driven by industrial demand, investment activity and festive season purchases. The government’s recent restrictions on silver imports have now triggered concerns about possible price increases in the domestic market.
Experts believe tighter supply conditions could push silver prices higher in the coming months. Jewellers and traders are also preparing for short-term volatility as global market trends and local availability continue to influence pricing.
Market participants say both gold and silver are likely to remain sensitive to international developments, especially geopolitical tensions and currency fluctuations, which continue to shape investor sentiment across global commodity markets.