BY COMFORT OGBNNA
Indian jewellery company shares fell sharply on Monday after Prime Minister Narendra Modi urged citizens to avoid purchasing gold for a year as part of broader efforts to protect the country’s foreign exchange reserves and reduce economic pressure caused by soaring energy costs.
The remarks sparked concerns across financial markets that the government could introduce higher import duties on gold to discourage purchases and reduce demand for foreign currency. Investors reacted quickly, sending shares of major jewellery retailers lower during trading.
Companies including Titan Company, Senco Gold, and Kalyan Jewellers saw their stock prices fall between 6% and 9% as fears grew that tougher restrictions on gold imports may be on the horizon.
Modi’s comments came amid growing economic strain linked to the ongoing conflict involving Iran, which has pushed global oil prices sharply higher. India, the world’s third-largest importer and consumer of crude oil, depends heavily on overseas energy supplies, importing more than 90% of its oil requirements and roughly half of its natural gas demand. Rising fuel costs are increasing pressure on India’s trade balance and weakening the rupee.
Alongside his warning about gold purchases, Modi reportedly encouraged fuel conservation measures, increased work-from-home arrangements, and reduced travel and imports as part of a wider push to ease pressure on the economy.
Gold occupies a deeply important place in Indian culture and society, particularly during weddings and religious celebrations. Gold jewellery is traditionally viewed as a symbol of wealth and security and plays a central role in bridal ceremonies. India is the world’s second-largest consumer of gold, but relies almost entirely on imports to satisfy domestic demand.
Industry leaders fear the government may once again turn to higher import duties as a tool to stabilise the currency and reduce pressure on foreign reserves. During earlier periods of rupee weakness in 2012 and 2013, India sharply raised tariffs on gold imports to curb demand and reduce the outflow of dollars.
Market concerns intensified because the government had only recently reduced gold import duties in 2024, cutting them from 15% to 6% in an effort to limit smuggling and support legal trade. Jewellers now worry those reductions could soon be reversed if economic conditions worsen.
However, a government source sought to calm speculation on Monday, stating that India currently has no plans to raise import duties on gold or silver.
Despite those assurances, concerns about the country’s broader economic outlook continue to grow. Analysts expect India’s balance of payments deficit for the current fiscal year to widen significantly, potentially reaching between $66 billion and $70 billion, compared with an estimated deficit of around $26 billion to $28 billion in the previous fiscal year.
Pressure on the Indian rupee has also intensified. The currency closed at a record low of 95.31 against the U.S. dollar on Monday, reflecting rising concerns about energy costs, foreign exchange reserves, and capital flows. In response, the central bank has reportedly intervened by selling dollars, limiting banks’ trading positions, and tightening oversight of certain financial transactions.
Meanwhile, government officials insisted that the country has sufficient supplies of gasoline and diesel despite the surge in global energy prices. However, state-run fuel retailers are reportedly facing growing losses because domestic fuel prices have remained unchanged since April 2022, forcing companies to sell gasoline and diesel below current market rates.
The combination of rising oil prices, a weakening currency, and fears of stricter import policies has increased uncertainty across India’s financial markets, particularly for industries closely tied to imports and consumer spending.
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