West Asia war: PM Modi’s call to cut gold imports gains urgency as forex reserves and rupee fall over 5%

Prime Minister Narendra Modi’s call for Indians to cut down on gold imports has gained significance against the backdrop of falling foreign exchange reserves and a weakening rupee.

Reserve Bank of India (RBI) data show that India’s forex reserves fell by as much as 5% in just a little over two months from around $728.5 billion on February 27, a day before the war between US-Israel and Iran began, to nearly $690.7 billion by May 1.

Alongside, the rupee also weakened by more than 5% — falling from 91.06 to the dollar to about 96 as on May 13, making it the worst-performing Asian currency so far this year.

Foreign currency assets (FCA), the largest component of India’s forex reserves, declined from nearly $573 billion in late February to around $552 billion by May 1. The fall reflects growing pressure from external payments and stronger global demand for dollars amid heightened uncertainty in global markets.

The decline in reserves was also amplified by the 11.50% decline in global gold prices, which reduced the valuation of the RBI’s gold holdings by nearly 13% during the same period.

India remains one of the world’s largest gold importers, and bullion imports require substantial dollar outflows. Gold imports surged from $34.3 billion in 2020-21 to a record $72.4 billion in 2025-26, marking a 111% rise over five years. To reduce the demand for the yellow metal, the Indian government has also raised import duty on gold from 6% to 15%.

Economists often view elevated gold imports as a source of pressure on the current account during periods when forex reserves are already under strain.