Indian Prime Minister Narendra Modi addressed the nation, urging citizens to suspend gold purchases and cut fuel consumption for at least one year. In his speech, Modi also recommended that people avoid "non-essential" trips abroad to ease pressure on the country's foreign exchange reserves.
"We should refrain from buying gold jewellery regardless of the occasion," the prime minister said. The bold initiative is aimed at combating a widening trade deficit, which has worsened due to the conflict in the Middle East and soaring energy prices. Gold remains India's second‑largest import after oil, and the country is the world's second‑largest consumer of the precious metal.
Market reaction
The stock market reacted immediately to the prime minister's appeal, with the jewellery sector tumbling. Shares of the industry's largest player, Titan Co., plunged 6.6% in Mumbai trading. Senco Gold slumped 10.8%, and Kalyan Jewellers India dropped 9.5%.
Economic context
India is facing growing pressure on its currency. An energy shortfall and disruptions to oil shipments through the Strait of Hormuz are weighing on the rupee. At the same time, gold imports have already been restricted by administrative measures for banks. Such moves temporarily improved the trade balance in April.
Experts doubt the effectiveness of Modi's appeal because gold is deeply embedded in India's financial and religious culture. The precious metal is the primary savings vehicle for hundreds of millions of families, and its use at weddings is considered essential. An attempt by the government to curb demand for a "safe haven" during a geopolitical crisis may meet strong resistance from a population that commonly trusts bullion more than government bonds.
