Why PM Modi is urging citizens to avoid buying gold and traveling abroad Prime Minister Narendra Modi has appealed to citizens to limit non-essential gold purchases and foreign travel to protect India's foreign exchange reserves and save dollars. Prime Minister Narendra Modi has appealed to the Indian public for the second time in four months to refrain from purchasing gold. During his visit to Kyrgyzstan, he released an Instagram reel urging citizens not to buy gold unless it is absolutely necessary. Earlier on 10 May, he had made seven specific appeals, which included cutting down on gold purchases, consuming less oil, and avoiding foreign travel. This ongoing policy aims to protect the country's foreign exchange reserves and strengthen the national economy. The Math Behind Import Bills and Forex Reserves The primary motive behind the Prime Minister's appeal is to save the country's dollar reserves. India procures the vast majority of its crude oil, electronic devices, machinery, gold, and other commodities from international markets. The accounting records for these purchases from foreign nations constitute the nation's import bill. These import bills are predominantly settled in US dollars, which are drawn directly from the Reserve Bank of India's foreign exchange or forex reserves. India imports nearly 90 percent of the gold it consumes from abroad. Consequently, a higher volume of gold purchases necessitates a larger payout in dollars, which inflates the import bill and depletes forex reserves. During the previous financial year spanning from April 2025 to March 2026, India purchased gold valued at 6.85 lakh crore rupees. Accounting for a 9 percent share of total expenditure on foreign goods, gold stands as the second-largest import. Ajay Kedia, founder of the investment advisory firm Kedia Advisory, notes that gold purchases and foreign trips directly drive the domestic demand for dollars. A decline in demand for both gold and foreign travel curtails the requirement for dollars, thereby strengthening the rupee and bolstering India's current account. Amid ongoing global uncertainties, prices for crude oil and fertilizers are steadily climbing, requiring India to secure larger dollar reserves. Curtailing or halting essential imports like crude oil, electronics, and machinery would immediately disrupt daily life and the broader financial health of the country. However, the same logic does not apply to gold. Once acquired, gold remains locked away in vaults, utilized primarily for financial gains or during extreme emergencies. This distinction is precisely why the Prime Minister has urged citizens to avoid acquiring non-essential gold. Previous Appeals and Market Repercussions Three and a half months prior, on 10 May, Prime Minister Modi issued a similar appeal during a public rally in Telangana. He remarked that while past generations willingly donated their gold during national crises, such donations are unnecessary today. Instead, he argued that citizens must resolve to halt gold jewelry purchases during family celebrations for an entire year in the national interest. Following this appeal, coupled with soaring gold prices, domestic gold importers scaled back their foreign acquisitions. While roughly 100 tonnes of gold were imported in January, import volumes plummeted to approximately 20 tonnes by June. Government figures for July and August remain pending, though market estimates suggest that roughly 45 tonnes of gold entered the country in July. Gold prices have regained upward momentum over the past four weeks, surging by up to 12,000 rupees. Several international factors drive this trend, including a weaker dollar, expectations of diminished yields on US bonds, and continued central bank gold acquisitions globally. Domestically, consumers are returning to jewelry stores, while bullion dealers stock up ahead of the festive season and manufacturers fulfill rising orders. Despite these sharp price increases, Indian consumers continue purchasing gold due to two fundamental factors. First, gold remains deeply embedded in cultural traditions. Weddings, festivals, and auspicious dates involve acquiring gold jewelry, coins, and bars. During weddings, gold functions as streedhan, providing financial security and independence for the bride. Purchasing gold during Dhanteras, Diwali, and Akshaya Tritiya is likewise viewed as a harbinger of prosperity. Second, gold functions as an inflation hedge and offers dual returns. For instance, purchasing 10 grams of gold for 1 lakh rupees last year yields a valuation of 1.6 lakh rupees today, reflecting a 60 percent gain. Over the same timeframe, global gold prices rose by only 50 percent, with the remaining 10 percent increase stemming from the depreciation of the rupee against the dollar. This dual benefit sustains long-standing public trust in gold. RBI Gold Reserves and Global Central Bank Trends While citizens are urged to curb purchases, the Reserve Bank of India's gold reserves have held steady at 880.52 tonnes over the past five months, valued at roughly 11 lakh crore rupees. This represents an all-time high for India, placing the nation eighth in global gold reserve rankings. Prior to this plateau, the RBI maintained steady accumulation, acquiring 185 tonnes between 2021 and 2025. Over the past decade, national gold reserves expanded from 560 tonnes to 880.52 tonnes, marking a 57 percent increase. Gold currently constitutes 15.3 percent of India's total forex reserves, representing a 5 percent increase over the previous year. India is not alone in this accumulation strategy. Central banks across nations such as China, Brazil, Turkey, and Poland are actively expanding their bullion reserves. China has steadily accumulated gold for 21 consecutive months, purchasing 20 tonnes in July alone—its largest single acquisition since October 2023—bringing its total reserves to 2,366 tonnes. Data from the World Gold Council indicates that central banks worldwide acquire an average of 1,000 tonnes of pure gold annually. Between April and June 2026, central banks collectively purchased 289 tonnes, with 73 percent of global central banks signaling intent to expand reserves over the next five years. This aggressive accumulation is directly tied to the US dollar. Global discussions regarding reducing trade and savings reliance on the dollar have intensified following a specific decision by the United States. When the Russia-Ukraine conflict erupted in 2022, the United States and its European allies froze 300 billion dollars in Russian foreign reserves, refusing to liquidate Russian funds held in US Treasury bills. This unprecedented move sent shockwaves through the global financial system, fostering widespread belief that Washington could weaponize its national currency. Consequently, nations worldwide began losing confidence in the dollar, shifting foreign reserves into alternative assets, most notably gold. While the US dollar accounted for 65 percent of global foreign reserves in 2016, that figure has dropped to 56.7 percent, a shift mirrored by India's reserve management strategy. The RBI seeks to mitigate dollar exposure within forex reserves through bullion acquisitions. While the dollar fluctuates continually and remains subject to potential geopolitical freezes, gold provides a universally accepted medium capable of purchasing commodities or settling transactions across any international border. The Economic Rationale Behind Curbing Foreign Travel Prime Minister Modi's appeal extends beyond gold to curbing foreign travel, which similarly impacts dollar reserves and foreign exchange allocations. Overseas journeys incur substantial expenses across flights, lodging, dining, sightseeing, and retail purchases, all settled in foreign currencies like the US dollar. According to annual data from India's tourism department, 3.27 crore Indians traveled abroad in 2025, marking a 5.9 percent increase from the prior year. Leisure and holiday travel accounted for 43.5 percent of these departures, representing a 6 percent rise compared to 2024. Expenditures by traveling Indians rose from 2.72 lakh crore rupees in 2023-24 to 3.65 lakh crore rupees in 2025-26. Industry estimates suggest that if even half of the leisure travelers chose to forgo overseas trips, the nation could preserve approximately 78,500 crore rupees in foreign currency. Data from the Confederation of All India Traders indicates that at least 5,000 Indian couples host destination weddings abroad annually, generating expenditures exceeding 50,000 crore rupees. Redirecting these overseas vacation and wedding expenditures toward domestic tourist destinations would retain vital foreign exchange within India, stimulate local economic growth, generate domestic employment, and directly benefit regional hospitality and transport providers. What this means for you The Prime Minister's appeal carries significant practical implications for national foreign exchange stability and personal financial planning. • Across India: Controlling non-essential imports preserves central forex reserves and stabilizes the rupee against external market pressures. This policy helps buffer the national economy against surging global commodity and energy costs. • For Gold Buyers: Restricting non-essential bullion purchases channels personal capital away from unproductive domestic storage and helps cool domestic demand pressures. • For the Tourism Sector: Redirecting overseas vacation spending toward domestic destinations keeps vital financial capital circulating within the national economy. • For Local Employment: Domestic travel and hospitality spending generates direct employment opportunities for regional hotels, transport providers, and tourism workers. • For Market Stability: Reducing foreign currency outflows strengthens macroeconomic fundamentals and assists in containing domestic inflationary pressures. Questions & Answers 1. Why has Prime Minister Modi urged citizens to avoid buying gold? The appeal aims to protect national foreign exchange reserves and control the widening import bill. 2. What percentage of gold does India import from abroad? India imports roughly 90 percent of the gold it consumes from international markets. 3. How much gold did India purchase during the 2025-26 financial year? India purchased gold valued at 6.85 lakh crore rupees during that financial year. 4. What is the current size of the RBI's gold reserves? The Reserve Bank of India currently holds 880.52 tonnes of gold in its reserves. 5. How many Indians traveled abroad in the year 2025? A total of 3.27 crore Indians traveled abroad during 2025. https://trendkia.com/en/investigations/why-pm-modi-is-urging-citizens-to-avoid-buying-gold-and-traveling-abroad-25888 TrendKia — Har trend, sabse pehle.