Prime Minister Narendra Modi’s suggestion urging citizens to avoid buying gold for a year could have far-reaching implications for India’s economy if adopted at scale. India remains one of the world’s largest consumers of gold, with annual demand typically ranging between 600 and 800 tonnes. In 2025, the country’s total gold demand stood at around 710.9 tonnes, while demand in the first quarter of 2026 reached 151 tonnes, driven largely by investment demand.
Gold holds deep cultural and financial significance in India, with purchases linked to weddings, festivals and wealth preservation. However, the country imports most of its gold, resulting in substantial outflows of foreign currency and contributing to a higher trade deficit.
Economists believe that a sharp reduction in gold purchases for even one year could significantly lower India’s import bill, reduce pressure on foreign exchange reserves and help strengthen the rupee by lowering dollar demand. A decline in gold imports may also help narrow the current account deficit, allowing more domestic capital to remain within the economy for productive investments and development activities.
Financial experts say redirecting household savings from gold into financial instruments such as bank deposits, mutual funds, SIPs, equities and government schemes could increase liquidity in the banking system and support industrial lending and economic expansion. Increased participation in capital markets could also help companies raise funds more efficiently and potentially generate employment opportunities.
At the same time, the move could negatively impact India’s jewellery industry, which supports millions of jobs across manufacturing, retail and artisanal sectors. Reduced demand during wedding and festive seasons may hurt jewellers, craftsmen and small businesses dependent on gold trade.
Analysts note that while completely abandoning gold buying may not be practical in a country where gold is deeply tied to tradition and emotional value, the discussion highlights a broader shift in investment behaviour. Younger investors are increasingly moving towards SIPs, equities and digital investment products, signalling a gradual diversification away from physical assets like gold.
