Gold is India's second-largest import after crude oil. Why that matters
Gold is more than a store of wealth for India—it is also the country's second-largest import after crude oil. According to Tata Mutual Fund, India's $72 billion gold import bill has implications for the rupee, inflation and the broader economy.
- Jun 12, 2026,
- Updated Jun 12, 2026 4:54 PM IST
Gold occupies a unique place in India's economy—not just as a store of wealth or a cultural asset, but also as one of the country's biggest import items. According to Tata Mutual Fund, India spent about $72 billion on gold imports in FY26, making the yellow metal the second-largest item on the country's import bill after crude oil.
That position carries implications extending far beyond jewellery demand and investment portfolios.
India imports most of the gold consumed domestically, making the country vulnerable to swings in global prices and movements in the US dollar. The issue becomes more pronounced when energy prices rise, as India also imports around 85% of its oil requirements.
West Asia tensions
According to Tata Mutual Fund, the ongoing tensions in West Asia pushed crude oil prices from around $70 a barrel to as high as $120 a barrel, resulting in a larger outflow of dollars from India.
"When dollars leave faster than they come in, the rupee weakens. A weaker rupee makes every import more expensive, which raises prices across the economy," the fund house said in its June outlook report.
Tata Mutual Fund, citing an Economic Times report, noted that every $10 rise in crude oil prices could add $13-14 billion to India's import bill.
MUST READ: Gold down 25%! Sell, Hold or Buy more? Experts say this dip could be...
With crude oil imports largely unavoidable, policymakers have limited options to manage the overall import bill. This, according to Tata Mutual Fund, partly explains the government's recent decision to increase the import duty on gold from 6% to 15%.
The move is aimed at discouraging excessive gold imports and reducing the outflow of foreign exchange at a time when higher oil prices are already straining the economy.
The challenge stems from the fact that gold purchases by households differ significantly from gold accumulation by central banks.
Indian consumers
Tata Mutual Fund pointed out that when Indian consumers buy gold, dollars leave the country to pay foreign suppliers, putting pressure on the rupee. However, when the Reserve Bank of India buys gold, it is merely changing the composition of its foreign exchange reserves rather than reducing their overall value.
The distinction has become increasingly important amid rising geopolitical uncertainty and efforts by central banks worldwide to diversify reserves away from traditional fiat assets.
Despite concerns over imports, India's central bank has continued to add to its gold holdings. The RBI purchased 72.6 tonnes of gold in 2024, making India the world's second-largest central bank gold buyer that year. By 2025, the country's gold reserves had risen to around 880 tonnes.
Gold's share in India's foreign exchange reserves also climbed sharply, from 8.4% in July 2024 to 16.2% by January 2026.
For investors, the developments underline the dual nature of gold in India. While the metal remains a popular hedge and wealth-preservation tool, its status as one of the country's largest imports means changes in gold prices and import policies can have far-reaching effects on the rupee, inflation and the broader economy.
As a result, gold is not merely a commodity for India — it is also an important macroeconomic variable.
MUST READ: Gold ETFs see record ₹725 cr outflow in May, first in 2026; Silver ETFs attract ₹2,133 cr
Gold occupies a unique place in India's economy—not just as a store of wealth or a cultural asset, but also as one of the country's biggest import items. According to Tata Mutual Fund, India spent about $72 billion on gold imports in FY26, making the yellow metal the second-largest item on the country's import bill after crude oil.
That position carries implications extending far beyond jewellery demand and investment portfolios.
India imports most of the gold consumed domestically, making the country vulnerable to swings in global prices and movements in the US dollar. The issue becomes more pronounced when energy prices rise, as India also imports around 85% of its oil requirements.
West Asia tensions
According to Tata Mutual Fund, the ongoing tensions in West Asia pushed crude oil prices from around $70 a barrel to as high as $120 a barrel, resulting in a larger outflow of dollars from India.
"When dollars leave faster than they come in, the rupee weakens. A weaker rupee makes every import more expensive, which raises prices across the economy," the fund house said in its June outlook report.
Tata Mutual Fund, citing an Economic Times report, noted that every $10 rise in crude oil prices could add $13-14 billion to India's import bill.
MUST READ: Gold down 25%! Sell, Hold or Buy more? Experts say this dip could be...
With crude oil imports largely unavoidable, policymakers have limited options to manage the overall import bill. This, according to Tata Mutual Fund, partly explains the government's recent decision to increase the import duty on gold from 6% to 15%.
The move is aimed at discouraging excessive gold imports and reducing the outflow of foreign exchange at a time when higher oil prices are already straining the economy.
The challenge stems from the fact that gold purchases by households differ significantly from gold accumulation by central banks.
Indian consumers
Tata Mutual Fund pointed out that when Indian consumers buy gold, dollars leave the country to pay foreign suppliers, putting pressure on the rupee. However, when the Reserve Bank of India buys gold, it is merely changing the composition of its foreign exchange reserves rather than reducing their overall value.
The distinction has become increasingly important amid rising geopolitical uncertainty and efforts by central banks worldwide to diversify reserves away from traditional fiat assets.
Despite concerns over imports, India's central bank has continued to add to its gold holdings. The RBI purchased 72.6 tonnes of gold in 2024, making India the world's second-largest central bank gold buyer that year. By 2025, the country's gold reserves had risen to around 880 tonnes.
Gold's share in India's foreign exchange reserves also climbed sharply, from 8.4% in July 2024 to 16.2% by January 2026.
For investors, the developments underline the dual nature of gold in India. While the metal remains a popular hedge and wealth-preservation tool, its status as one of the country's largest imports means changes in gold prices and import policies can have far-reaching effects on the rupee, inflation and the broader economy.
As a result, gold is not merely a commodity for India — it is also an important macroeconomic variable.
MUST READ: Gold ETFs see record ₹725 cr outflow in May, first in 2026; Silver ETFs attract ₹2,133 cr