Prime Minister (PM) Narendra Modi, on Sunday, at a rally in Hyderabad, asked Indians to avoid buying gold for weddings for one year. He also asked to avoid foreign travel to strengthen the economy against the adverse impacts of the West Asia crisis. The PM’s remarks came as crude oil prices sharply rose following the West Asia crisis and tensions around the Strait of Hormuz, one of the world’s most important oil shipping routes.
Global crude oil prices have jumped from around $70 per barrel to nearly $126 per barrel in recent times. This has sharply increased India’s import bill.
India’s gold imports hit a record $71.98 billion in 2025-26, rising over 24% from $58 billion a year earlier. This was mainly because of the surge in global gold prices.
How do gold import affects the foreign exchange of India?
Gold and crude oil have one major thing in common for India as both are largely imported and paid for in US dollars. India imports nearly 85% of its crude oil needs. So, when India buys gold from outside, it pays in dollars. The more the gold is imported, the more the dollar is required. This reduced the foreign exchange reserves, which in turn leads to an appreciation of the dollar and depreciation of the rupees.
The Current Account Deficit (CAD), which measures the gap between imports and exports also takes a hit when imports rise and exports do not rise in the same proportion.
