Why gold worries the Prime Minister

In today’s episode on 13th May 2026, we tell you why the Prime Minister doesn’t want you to buy gold and what could happen to the economy if you actually listen to him. Book a FREE call with Ditto https://ditto.sh/vx51ji

• 0:00Speaker 00

  Hello folks, you're tuned into Fun Charts Daily. In today's episode, we tell you why the Prime Minister doesn't want you to buy gold and what could happen to the economy if you actually listen to him.

• 0:15Speaker 00

  Before we begin, here's a quick word from Team Ditto. Life has a way of surprising us and not always in a good way. Sometimes it's a sudden illness or an unexpected hospital visit that can shake up everything. In India, families still pay about 39% of medical expenses directly from their own pockets and just one hospital's take can wipe out years of savings. The easiest way to protect yourself is by getting a good health insurance plan. It's way cheaper than footing one huge bill. And if you're unaware where to start, book a free call with Ditto. No spam, just honest, jargon-free guidance. Trusted by over 8 lakh people for their health and term insurance needs. The link is in the description. Now, back to the story. You heard it, it's all over the news and internet.

• 1:00Speaker 00

  Prime Minister Narendra Ramari does not want you to buy gold for another year, even if you have a wedding or special occasion at home. Now, the reason is simple. There's a war in the Middle East and that war is indirectly affecting India and the world by increasing the cost of fuel, food and fertilizer. That's because a large share of our fuel and fertilizer supplies comes through shipping routes in the Middle East. If the state of war moves through which many of these ships pass gets disrupted because of the war, prices naturally go up. And when fuel and fertilizers become expensive, food prices rise too because you need fertilizer to grow food and fuel to transport it. So, the Prime Minister's point is that even though prices are rising, the government is trying its best to avoid burdening the public.

• 1:45Speaker 00

  For instance, it is still providing fertilizers at subsidized rates and has not sharply increased petrol and diesel prices despite soaring crude oil prices. In return, he suggests citizens could also try to do their part by reducing expenses that force the government to spend more. For example, use less cooking oil because India imports over half of its edible oil needs. Reduce commuting by personal vehicles and use public transport, carpool or even work from home. Impossible since India imports nearly eighty five percent of its crude oil requirements. And most importantly, cut down on gold purchases because nearly ninety percent of India's gold is imported. All of this forces the government to spend more of its foreign exchange reserves on imports.

• 2:24Speaker 00

  While all of this may make sense, you may have noticed that the stock prices of most popular listed jewelry retailers fell over by five percent on average since Monday, the day after the Prime Minister's speech. And that may have been natural because investors worried that if people actually cut back on buying gold, demand could fall and these dwellers could earn less revenue. Which makes you ask, if I stop buying gold, how will it affect India's economy? Now, to understand that, let's first see how buying gold affects the economy in the first place. Say you buy a ten gram twenty two carat gold chain today. Around eighty four percent of the price that you pay is simply the value of gold itself. Out of that, the government only earns import duty and GST on the raw gold being imported.

• 3:08Speaker 00

  Together, that works out at roughly seven percent of the final price you pay for the chain. So, most of your money doesn't really stay in the economy. It leaves the country as foreign exchange used to import raw gold. Once the raw gold is imported and refined, the domestic refiner charges about one percent margin before selling it to the jeweller. And at every stage where the gold changes hands, the government also earns three percent GST. Finally, when you buy the chain, roughly twelve percent of the final price gets split between the carigars, that is the craftsmen, who make the jewelry and the jeweller's profit margin, both of which are pretty thin. And when you put all of this together, the gold industry contributes only about one point three percent to India's GDP. The figure rises to around seven percent only when you include the entire gems and jeweler sector.

• 3:52Speaker 00

  But a large part of that comes from exports and diamond processing, not from Indians buying gold jewelry domestically. Yet, to generate this relatively small impact on GDP, India imports seven hundred to eight hundred tons of gold every year worth nearly six lakh crore rupees. And most of that gold is not really productive for the economy because people mostly buy it either as an investment or to wear as jewelry. Sure, you can take a gold loan against it during difficult times, which does help banks. Earn income but even that depends on imported gold and all these imports put pressure on India's foreign exchange reserves and widen the current account deficit which is the amount by which a country's total imports exceed its exports.

• 4:32Speaker 00

  In fact, India's current account deficit rose to thirteen point two billion dollars or one point three percent of GDP in Q three F I twenty six compared to eleven point five billion dollars in the previous quarter. While there's no exact figure showing how much gold contributed to this number, gold imports alone account for about two point one percent of India's nominal GDP in the merchandise trade deficit which is a deficit that occurs when a country's physical goods imports exceed its exports. So, yes, the only real way to reduce this pressure is to depend less on imported gold and for that, there are only two options. One, rely more on recycled gold which can save about ninety five million dollars or about roughly eight ninety three crore rupees per tonne in imports.

• 5:17Speaker 00

  And two, simply buy less gold or don't buy it at all. The government has already tried the first option. You probably know about sovereign gold bonds. The idea was simple. Instead of buying physical gold, people could invest in bonds linked to the price of gold. These bonds were denominated in grams of gold, paid annual interest, and also gave investors the benefit of any rise in gold prices when the bond matured. The government hoped this would reduce gold imports because people could invest in gold without actually buying the metal itself. But as you know, it worked only to a limited extent. In fact, it ended up increasing costs for the government which eventually stopped issuing these bonds quietly. The government also tried gold monetization schemes in the past.

• 5:58Speaker 00

  Under these schemes, people could deposit idle gold lying at home with banks and earn interest on it. The banks would then melt that gold and recycle it to dwellers who could use it as raw material instead of buying freshly imported gold. If you wanted your gold back later, you would get back the same quantity of gold you deposited, but usually in form of bars or coins, not your original jewelry. And that's exactly where the problem lies. Even though Indian households are estimated to hold over nearly twenty five thousand tonnes of gold, much of it carries huge sentimental value. These are family heirlooms. Wedding gifts or jewelry passed down generations. And parting with that gold and letting it be melted away isn't something most people would do, right?

• 6:39Speaker 00

  Even if you leave household gold aside, there's another place where huge amount of gold is locked away. Indian temples. Devotees often donate gold oradon deities with gold jewelry and ornaments. And estimates just that Indian temples collectively hold between twenty-five-hundred and four-thousand tonnes of gold in the form of jewelry, coins, bars and ornaments. To put that into perspective, even the lower estimate is more than half the gold held at United States Billion Depository at Fort Knox. Now, the RBI did try to convince some of India's richest temples to disclose the value of their gold holdings. The idea was to understand how much gold could potentially be monetized if temples participated in gold monetization schemes and how much India could reduce gold imports as a result.

• 7:22Speaker 00

  But, that's a sensitive issue and most temples were understandably not comfortable with it. Which is why only a few, like the Tirumala Tirupati Venkateswara Temple, one of the richest temples in the country, voluntarily participated in the scheme. As of twenty-twenty-four, the total gold it has deposited under such scheme stood at around eleven-thousand-three-twenty-nine kilos, which at today's price is worth roughly seventeen-thousand-one-hundred crore rupees. So with limited success from gold monetization and similar schemes, the only other option left for the government is to encourage people to buy or avoid buying it altogether for some time. Just like the Prime Minister suggested, even if it means lower sales for jewelers and less work for the lacks of artisans involved in making jewelry across the country.

• 8:07Speaker 00

  But, in India, having a wedding at home and not buying gold is a tough idea for most people to accept. Whether people actually listen to the Prime Minister's request in the interest of the nation is something that will be very interesting to see. Alright folks, I will see you in the next one. Thank you for listening to today's episode. And if you want to share your feedback or suggestions, do drop us an email to [email protected]. Until next time.