From the international market to the local markets, gold has once again reached near its peak. Apart from China, Europe and other countries of the world, India’s central bank RBI is leaving no stone unturned in buying gold. This gold buying spree has created such a problem for India that even the government had not thought about. Now the question is, what is that problem? In fact, gold has started spoiling the economic health of the country.
The country’s current account deficit has increased significantly in the second quarter of the current financial year. Which no one expected. According to the information, in the second quarter of the financial year 2026, India’s current account deficit i.e. CAD increased sequentially to US $ 12.3 billion or 1.3 percent of GDP. Experts believe that despite the strong growth of services exports and remittances, this deficit has increased due to the sharp increase in merchandise trade deficit. In the last quarter, CAD was 0.3 percent of GDP.
Gold import spoils health
According to assessments by Crisil, ICICI Bank Research and Emkay Global, gold imports surged nearly 150 per cent quarter-on-quarter to US$19 billion in the second quarter, leading to a widening of the commodity deficit, while commodity exports declined sequentially following the imposition of high US tariffs on Indian shipments. Total commodity exports stood at about US$109 billion, while imports rose to about US$197 billion.
Services exports grew by double digits, with CRISIL estimating that IT and business services receipts rose to US$101.6 billion in the quarter. Net services exports witnessed a 14 per cent year-on-year growth, while remittances rose to US$36-39 billion, helping bridge the widening goods gap.
worse news from here
The capital account surplus declined sharply to US$0.6 billion, or 0.1 per cent of GDP, compared to US$8 billion in the previous quarter. Citing weak foreign investment in both FDI and FPI, MK Global said that FIIs continued to book profits and FDI inflows remained slow.
ICICI Bank Research also pointed to low loan distribution and less external assistance. With financial flows weakening, India’s balance of payments slipped into a deficit of US$11 billion in Q2FY26. There was an overall decline of US $ 10.9 billion in the foreign exchange reserves of RBI on the basis of balance of payments during the quarter.
Giant firm’s estimate
MK Global has increased its CAD estimate for FY 2026 to 1.4 percent of GDP from the earlier 1.2 percent. The company has made this estimate citing negative export growth during the year (-7 percent) and strong growth in non-oil partly driven by gold imports. Gold imports are expected to increase by 22 percent in fiscal year 2026. The brokerage said better exports of services would mitigate the impact of the widening merchandise deficit, but volatile foreign flows could continue to put pressure on the balance of payments, leading to a deficit of US$22-23 billion for the full year.
Rupee will continue to fall
Analysts from various institutions believe that the rupee will continue to remain weak. The MK suggested that policy priorities are shifting towards a soft currency to offset the tariff-induced export shock. It has estimated that the US dollar/rupee is likely to trade in the range of 88-91 by the end of FY 2026, depending on the development of the US-India tariff talks. CRISIL and ICICI Bank similarly indicated that global headwinds, high tariffs and strong domestic demand will keep external balances under pressure in the coming quarters, although strength in services and remittances may provide some flexibility.