Gold imports rise by nearly 29% to $69 bn in Apr-Feb 2025-26
India's gold imports saw a significant rise of 28.73 percent, reaching USD 69 billion in the first eleven months of fiscal 2025-26. This surge, attributed to elevated gold prices, has contributed to a wider trade deficit. Switzerland remains the primary source for these imports. The increased gold imports also impact the country's current account deficit.
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Context
According to Commerce Ministry data, India's gold imports surged by 28.73% to USD 69 billion during the April-February 2025-26 period. This significant increase has widened the country's trade deficit to USD 310.60 billion for the same period. In response to the rising imports and to curb the misuse of Free Trade Agreements (FTAs), the government has imposed import restrictions on articles of gold, silver, and platinum.
UPSC Perspectives
Economic
The surge in gold imports directly impacts India's external sector stability by widening the Current Account Deficit (CAD). CAD occurs when a country's total value of imports of goods and services is greater than the value of its exports. High gold imports, second only to oil, are a major driver of India's CAD. According to data, the CAD widened to USD 13.2 billion (1.3% of GDP) in the December quarter, largely due to a higher trade deficit. A persistent high CAD exerts downward pressure on the Indian Rupee, as higher imports lead to increased demand for foreign currency (like the US dollar), potentially leading to currency depreciation. While remittances and service exports can cushion the CAD, reliance on volatile capital flows to finance the deficit makes the economy vulnerable to global shocks. This situation highlights the classic dilemma for Indian policymakers: balancing cultural affinity for gold with macroeconomic stability.
Governance
The government's primary policy response has been to use trade policy instruments to manage gold inflows. The recent decision by the to move imports of gold, silver, and platinum articles from the 'Free' to the 'Restricted' category is a significant governance measure. This means importers now require a specific license or permission, giving the government direct control over the import volume. This action was reportedly taken to prevent the misuse of Free Trade Agreements (FTAs), particularly the India-ASEAN FTA, where traders were allegedly routing imports through partner countries to exploit duty differentials. This highlights a critical governance challenge in implementing trade policies effectively and plugging loopholes that lead to revenue loss and undermine domestic industry. The government also employs financial instruments like the Sovereign Gold Bond (SGB) Scheme, launched in 2015, to shift consumer demand from physical gold to a dematerialized form, thereby reducing import dependency.
Social & Fiscal
India's high demand for gold is deeply rooted in social and cultural factors, where it is considered a safe haven asset and is integral to weddings and festivals. This persistent demand makes gold a non-productive asset from a macroeconomic viewpoint, as it diverts domestic savings away from financial markets that could fund productive investments in infrastructure and industry. The government's introduction of the is a strategic attempt to address this by offering an alternative to physical gold. SGBs provide an annual interest of 2.5% and are exempt from capital gains tax if held to maturity, aiming to financialize household savings. However, this creates a fiscal liability for the government, as it is obligated to pay interest and redeem the bonds at the prevailing gold price, which can become burdensome during periods of rising gold prices. Therefore, managing gold demand involves a complex interplay of influencing social behavior, providing viable financial alternatives, and managing the associated fiscal costs.