Narendra Modi, India’s Prime Minister, announced a few days ago that, in order to protect the country’s interests, people should refrain from buying gold jewelry for one year even if weddings and other ceremonies take place during this period.
In part of his remarks, Modi said: “Patriotism is not only about being ready to sacrifice one’s life at the country’s borders, but in these times it also means living responsibly and fulfilling national duties in everyday life.”
Three days after these statements, the Indian government increased the import duty on gold from 6% to 15%. For the world’s second-largest gold market in terms of jewelry and investment, this move has been described as a significant and difficult decision.
According to statistics, India’s gold imports in the previous fiscal year reached 72 billion dollars.
Gold holds a special place in Indian culture and is commonly given as a gift during wedding ceremonies. Many families also pass down the precious metal as a family inheritance to future generations.
The Indian government says that large-scale gold imports require spending huge amounts of foreign currency, especially at a time when the country is facing rising oil prices. India imports more than 85% of its oil needs, and higher energy prices have placed additional pressure on the economy.
Following the military conflicts involving the United States, Israel, and Iran, as well as the closure of the Strait of Hormuz, global oil prices rose sharply. The Strait of Hormuz is considered one of the world’s main energy transit routes, with around 20% of the world’s oil and liquefied gas passing through it.
Rising energy costs have forced governments around the world to adopt austerity and cost-saving measures. However, India is among the few countries that has directly asked its citizens to reduce gold purchases.
Economic experts say that the cost of importing gold and oil both largely paid for in US dollars has put heavy pressure on India’s foreign exchange market. Increased demand for dollars has weakened the Indian rupee, which has fallen by about 5% against the dollar this year, a situation that could further increase inflation.
Sanjeev Agarwal, a jeweler based in Delhi, said: “For the gold and jewelry market, these conditions are even more difficult than the coronavirus period.”
Abhishek Agarwal, another jeweler in the capital, also said that the market is in recession, and if people stop buying gold, it will become difficult for many sellers to continue operating.
Writer:Salima Aryaei
