PM appealed not to buy gold
Amidst the increasing tension in West Asia and the rise in crude oil prices, Prime Minister Narendra Modi has appealed to the countrymen not to buy non-essential gold for one year and has appealed to save foreign exchange. The government believes that if gold imports decrease, the pressure on India’s current account deficit (CAD) and foreign exchange reserves can be reduced. However, this appeal can directly impact the demand of jewelery industry and wedding season.
India is among the world’s largest gold importers. The country buys most of its gold needs from abroad, for which large amounts of dollars are spent. At a time when crude oil is also becoming expensive, the government does not want the import bill to increase further. For this reason, PM Modi has advised people to give priority to essential expenses and limit the purchase of gold.
Impact on jewelery market
If people take the government’s appeal seriously, the demand for gold jewelery may weaken during wedding and festival seasons. Its impact may be visible on the sales of bullion traders, jewelery retail chains and small goldsmiths. Gold prices have reached record levels in the last few months, so consumers are already cautious about purchasing.
What will be the impact on the economy?
On the other hand, if seen from the economic point of view, the government can get the benefit of reduced gold imports. This will save dollars, keep current account deficit under control and provide support to foreign exchange reserves. The pressure on the rupee due to rising import bill of oil and gold may also reduce to some extent. PM Modi made a total of 10 major appeals in his address, in which he emphasized on economic discipline. In such a situation, changes in behavior related to consumption and investment may be seen in the coming months.
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