Since the West Asia crisis began, Modi has appealed to citizens twice to avoid buying gold for a year in order to curb non-essential imports and help the nation conserve foreign exchange. The calls came in the backdrop of gold imports hitting a record US$ 71.98 billion in 2025–26, accounting for nearly 9–10% of India’s total import bill and becoming the second-largest imported commodity after crude oil.

So, it is time to ask how citizens have responded to the call given by the Prime Minister - first on 10 May and then again on 1 September. Has it helped offset the craze for buying the yellow metal? 

Going by the trends in gold imports and sales reported by domestic companies, the response from the citizens can, at best, be described as lukewarm or subdued.

Gold Imports

Gold imports have continued to surge, draining foreign exchange, while on the domestic front jewellery companies have reported bumper sales in value terms. 

Gold imports in April rose 81.69% to US$ 5.63 billion. It increased in subsequent months before declining by 57.75% to US$ 2.3 billion in August. But, with the festival and marriage season round the corner, the falling imports need not be a reason to rejoice. There are no indications that demand for the yellow metal will decline in the coming months.

Gold, in fact, is deeply woven into the socio-cultural fabric, serving as an indispensable part of weddings, festivals, and also security. Public demand for the precious metal has remained remarkably resilient. For consumers, the long-standing cultural affinity and security have outweighed the government nudges when it comes to buying gold.

According to a World Gold Council report, India is a leading buyer of gold jewellery, much ahead of China and the US. In bars and coins, however, India ranks at second position after China, though ahead of countries like Turkey, Indonesia, and the US. 

The rising prices of the precious metal, partly driven by large purchases of gold by the central banks, have also prompted investors to buy gold-linked Exchange Traded Funds (ETFs) in small as well as large quantities. These investments fuelled the demand further as the ETFs are mandated to buy physical gold from the amount collected from investors.

Rising Import Of Gold

Driven by strong domestic demand, which is linked to jewellery purchases, investment, weddings, festivals, and a steep rise in international prices, the country's gold import bill has risen sharply over the years, despite fluctuations in physical volumes.

Gold imports increased from US$ 35.02 billion in 2022-23 to US$ 45.54 billion in 2023-24, a 30% rise. In 2024-25, imports surged further to US$ 58.01 billion, up 27.4%, making gold India’s second-largest import commodity after crude oil. Thereafter, it zoomed to US$ 71.49 billion in 2025-26.

From the macroeconomic point of view, a high gold import bill adds pressure to India’s trade deficit, current account deficit, and foreign-exchange outgo.

According to veteran banker and Kotak Mahindra Bank founder Uday Kotak, the country needs to check the rising import bill, which could reach US$ 88-90 billion in 2026-27. He suggested that the government should set up a committee to examine ways to manage gold demand and address capital and current account challenges.

"For FY26, the current account deficit of India was US$ 25 billion. So we had our current account deficit very controlled. Gold imports gross in one year is US$ 72 billion. Therefore, if you exclude gold, India had a current account surplus," said Kotak.

Observing that much of the gold being held by Indian households is not being channelised into productive economic activity, Kotak quipped, “Indians and their gold - that is a puzzle we have to find a way to solve." 

Craze For Yellow Metal Continues

The galloping prices of gold have failed to neutralise the craze for it. The 24-carat gold rate in India climbed to about ₹1,54,210 per 10 grams in September, from roughly ₹82,000 per 10 grams at the beginning of 2025. As per the quarterly exchange filings by listed jewellery companies, consumers spent substantially more on gold, while in certain cases the quantity purchased declined.

Observing that domestic gold prices soared to unprecedented levels due to a rise in global gold prices amid geopolitical uncertainties, as well as a depreciating Indian rupee against the US dollar, a Crisil Ratings report said, “(it) has hurt affordability, prompting a shift towards lightweight, lower-carat gold jewellery (16-22 carat range) and studded jewellery.”

A Deloitte survey too said “high gold prices are changing buying behaviour — but not breaking gold’s dominance. The most common consumer response to rising gold prices is to reduce weight while retaining purity”.

Leading jewellery firm Titan Company, which owns the brand Tanishq, registered 39% growth in business in the first quarter (April-May 2026-27). “Growth, across the brand portfolio, was contributed by healthy festive and Akshaya Tritiya demand during the quarter”, it said. 

Titan’s jewellery brands added 33 stores during the quarter and had 1,227 stores as of June 2026.

Kalyan Jewellers reported consolidated revenue growth of approximately 38% year-on-year in the April-June quarter, while revenue from its India operations grew by more than 38%. The company’s filing said international operations grew about 35%, with the Middle East recording around 30% growth. Its digital-first platform, Candere, recorded approximately 112% revenue growth.

Senco Gold delivered the strongest reported growth among the gold-linked companies. Its consolidated revenue increased 67% year-on-year to ₹30.56 billion, while standalone sales rose 65% to ₹30.06 billion. Retail sales grew 50% to ₹26.51 billion. 

Investment in gold ETFs too surged as investors sought portfolio diversification and protection against inflation, geopolitical uncertainty, and volatile equity markets.

According to the Association of Mutual Funds of India (AMFI) data, gold ETFs attracted a record ₹688.68 billion in net inflows during 2025-26, while assets under management rose 191% year-on-year to ₹1.71 trillion by March.

Momentum continued in August 2026, with inflows increasing 67% month-on-month to ₹25.96 billion, from ₹15.58 billion in July. The number of gold ETF schemes reached 26, with assets touching ₹1.91 trillion by August end. 

Design Flaws In Sovereign Gold Bonds Scheme

The government attempted to check the craze for physical gold by giving investors an option to invest in Sovereign Gold Bonds (SGB). The scheme, launched in November 2015, was conceived as a policy innovation to monetise India’s household gold demand, curb imports, and offer a tax-efficient, paper-based alternative to physical gold.

The last primary issuance of SGBs was the 2023–24 Series IV tranche, which opened for subscription on 12 February 2024 and closed on 16 February 2024. Since then, no new SGB tranches have been issued. While the government has not issued a formal “scheme closure” notification, the scheme is effectively discontinued for fresh subscriptions.

The SGB scheme suffered from design flaws as there was no provision for hedging the liability. Proceeds from SGB issuances were not used to acquire physical gold reserves; instead, they were absorbed into general government expenditure, creating a “naked short” position on gold prices.

Policymakers implicitly bet on gold price stability, an assumption that held between 2014 and 2019 but collapsed thereafter. As gold surged from roughly ₹2,700 per gram in 2015 to over ₹12,000 by late 2025, redemption liabilities ballooned, implying effective returns exceeding 15% for early investors — far above the 2.5% coupon initially promised.

The scheme’s design flaws and macroeconomic misjudgments have turned it into a significant fiscal liability, with outstanding redemption obligations being estimated at ₹1.5–2.2 trillion by 2025–26. The liability will fall on the exchequer. This prompted the government to virtually end the scheme.

The Path Ahead

As there are no easy solutions to the problem of India’s obsession with the yellow metal, the government needs to seriously consider the suggestion of Kotak to set up a committee to recommend workable solutions to deal with the problem.

Indian households, according to a World Gold Council report, currently hold an estimated 31,000 tonnes of gold, valued at approximately ₹314.9 trillion (US$ 3.4 trillion).

“Monetising even 1% of this idle stock annually could substitute gold imports worth around ₹3.1 trillion (US$ 34 billion), reduce import dependence while unlocking significant domestic economic value,” it added.