Why PM Modi has asked Indians to reduce spending on gold, petrol, edible oils

First, why gold?

Quite simply, India is not a gold producer and imports almost all of its gold. Last year, India spent about $72 billion – approximately $6 billion per month – on gold alone. This situation is complicated by gold’s dual role as a consumer import and a reserve asset.

The Reserve Bank of India has been aggressively accumulating gold, adding 168 tonnes from London over the past year to a total of 880 tonnes as of March 2026. Gold currently comprises 16% of India’s total forex reserves, an increase from 10% last year.

However, household gold purchases have a different economic effect. Unlike the RBI’s reserve-management operations, consumer demand for imported gold directly increases dollar outflows from the economy. Large-scale gold imports can therefore add pressure on India’s current account deficit and increase demand for dollars, which may weaken the rupee over time.

As dollars flow out, the Indian rupee weakens, making gold even more expensive. This creates a vicious cycle in which the Indian consumer pays more rupees for gold because previous gold purchases have added to pressure on the rupee.

How petroleum products are adding to this strain

India currently imports about 89% of its oil, while domestic oil production has been declining over the past decade. As with gold imports, the rise in oil prices — from about $70 per barrel to $113 over the past year — translates directly into increased dollar outflows, with limited ability to produce its way out of the shortfall in the near term.

While retail prices of petrol and diesel have been held stable, the shortfall has been absorbed by government-owned oil marketing companies that dominate fuel retailing. The Indian Express reported on Friday (May 8) that these companies have faced mounting under-recoveries — the difference between the retail price and the import price — and have incurred heavy losses as international oil prices surge. The OMCs have also been losing money on aviation turbine fuel, adding to the strain.

Given that the government has signalled no plans to compensate OMCs for these losses, a price hike is widely expected, with the companies themselves pushing for such a revision. However, such a hike would not stop at the petrol pump. Most freight transport in India relies on diesel, and fuel price hikes feed through the entire supply chain within days, translating into higher prices for groceries, transport, and everyday goods, which are ultimately borne by the consumer.

The bigger dilemma posed by edible oils

The Prime Minister also flagged edible oil as a major component of India’s forex bill, framing reduced consumption as both an economic and public-health measure. “We have to spend foreign currency on its import. If every household reduces the use of edible oil, it is a huge contribution to patriotism. This will improve the health of the national treasury and the health of every family member,” he said.

India depends heavily on imports for its edible oil needs — palm oil from Indonesia and Malaysia, as well as sunflower oil from Russia and Ukraine. While gold purchases can be deferred, or fuel can theoretically be conserved, edible oil has limited substitutes and is a daily essential.

This problem is compounded by the rupee’s decline: a weaker rupee raises the cost of every imported litre, with edible oil price rises moving rapidly through the supply chain to the consumer’s plate. While domestically available alternatives like mustard oil exist, these cannot be scaled up quickly enough to replace imports. Strong regional consumption preferences also make a nationwide shift to alternatives extremely difficult to implement.

Fertilisers as a pressure point

The Prime Minister also recommended reducing the current use of chemical fertilisers by half, citing the significant foreign exchange spent on their imports.

This is evident from the numbers: the price of urea imported by India has risen from $508 per tonne in February to $935 per tonne as West Asia supply routes came under severe disruption, The Indian Express reported on April 20. Similarly, the price of DAP (di-ammonium phosphate) has increased from $680 last year to an expected landed price of $925 per tonne. Ammonia prices, too, have more than doubled from $435 to $850–900 per tonne.

About 75% of India’s urea imports come from Gulf Cooperation Council countries, while domestic urea plants depend on LNG — over 60% of which is imported from Qatar, UAE, and Oman through the Strait of Hormuz — as feedstock, The Indian Express reported on March 9. Any sustained disruption to that route could affect not just fertiliser imports, but also domestic urea production.

Add to this the supply crunch: India needs 19.4 million tonnes of urea for the upcoming kharif season alone, against available stocks of just 5.5 million tonnes in early April. Domestic production has also taken a hit — urea output fell to 1.5 million tonnes in March against a normal monthly run rate of 2.5 million tonnes, due to disruptions in LNG supplies from the Gulf.

If stocks cannot be adequately replenished before kharif planting begins in June, higher farm input costs will translate into higher food prices.