New Delhi: Amid escalating tensions in West Asia, Prime Minister Narendra Modi has urged citizens to adopt austerity measures, specifically calling for the postponement of gold purchases and foreign travel. This appeal comes as India's gold imports hit a historic peak, creating huge pressure on the national economy.

Explaining the import surge

India's gold imports soared by over 24% to a record USD 71.98 billion in the 2025-26 fiscal year. While the actual volume of gold imported slightly decreased to 721.03 tonnes, the total value skyrocketed due to surging global prices. In the national capital, gold prices have been hovering around ₹1.5 lakh per 10 grams, nearly doubling in a relatively short period.

Impact on trade deficit

The massive influx of gold, which accounts for roughly 9% of India's total imports, has widened the trade deficit to USD 333.2 billion. This surge heavily impacts the Current Account Deficit (CAD), which reached USD 13.2 billion (1.3% of GDP) in the recent December quarter. To counter this, the government has imposed restrictions on various gold, silver and platinum articles to prevent the misuse of free trade agreements.

The Dubai connection and FTA concerns

Switzerland remains the primary source for Indian gold, but the UAE’s share has grown remarkably. Experts from the think tank GTRI have raised concerns regarding the India-UAE Comprehensive Economic Partnership Agreement (CEPA).

"The trend raises concerns because the UAE neither mines gold nor carries out major processing activity. Much of the trade appears to involve routing gold from third countries through Dubai simply to benefit from lower Indian tariffs," stated GTRI founder Ajay Srivastava.

Following duty cuts in the 2024 Budget, gold from Dubai effectively enters India at a 5% duty, leading to a surge in imports from the region.

 

PTI