Modi's renewed appeal to curb gold purchases follows earlier decline in imports

Prime Minister Narendra Modi’s renewed appeal to Indians to curb gold purchases comes at a time when the government is trying to contain the country’s gold import bill and bring more of the yellow metal held by households into circulation.

But did Modi’s similar appeal in May actually curtail India's gold imports?

Data accessed by ET Online shows that India’s gold imports did fall in the months after the May appeal. Imports declined nearly 4% year-on-year in May to 29.4 tonnes from 30.6 tonnes in the same month a year earlier. The fall then became sharper, with imports dropping 20% in June, 23.7% in July and nearly 30% in August, according to data by Metals Focus, which partners directly with the World Gold Council (WGC) as its primary external research provider.

However, the decline cannot be attributed to Modi’s appeal alone. India also raised the customs duty on gold and silver to 15% from 6% in May, making imported gold more expensive. Gold prices have also remained elevated, which can influence both consumer demand and import volumes.

In May, Modi had urged Indians to reconsider buying gold as the country faced the challenge of managing its import bill. Last week, he made a similar appeal, raising the possibility of another slowdown in imports.

The India Bullion & Jewellers Association expects the latest appeal to contribute to a roughly 15% decline in gold imports in September.

The government has a larger economic objective behind its push. India is one of the world’s biggest consumers of gold and imports most of what it uses. A sustained reduction in gold imports could help ease pressure on the trade balance and the current account. At the same time, the government wants households to put some of the estimated 31,000 tonnes of gold held by Indians to productive use rather than keeping it idle.

The numbers show that the change in import trends after May was significant. But they also show that the slowdown came after a period of strong growth.

Before Modi’s May appeal, imports had started the year on a much stronger note. January imports surged 171.6% year-on-year to 99.4 tonnes from 36.6 tonnes a year earlier. February imports more than doubled, rising 114.3% to 66 tonnes from 30.8 tonnes.

The trend changed in March, when imports fell 34.9% to 32.9 tonnes from 50.5 tonnes. Imports recovered in April, rising 30.7% to 45.6 tonnes from 34.9 tonnes.

India, the second-largest consumer of gold after China, roughly imports close to 700 to 900 tonnes of gold annually.

The government will now be watching September closely. If imports fall as much as the bullion industry expects, it could offer an early indication of whether Modi’s renewed call to limit gold purchases is translating into a measurable change in consumer behaviour.