The appeal came a day after Prime Minister Narendra Modi called on citizens to postpone gold purchases in an effort to conserve foreign exchange reserves amid global supply disruptions caused by the ongoing conflict in West Asia.
In a letter addressed to Commerce Minister Piyush Goyal, the All India Jewellers & Goldsmith Federation stated that reducing consumer demand without establishing structural alternatives could destabilise the jewellery sector, which supports nearly 35 million livelihoods across the country.
AIJGF President Pankaj Arora said the objective of protecting India’s foreign exchange reserves was understandable, but cautioned that “demand destruction” was not the right solution. He asserted that the government should instead prioritise domestic gold mobilisation, recycling and productive circulation of idle gold holdings already available within the country.
India remains the world’s second-largest consumer of gold after China and relies heavily on imports to meet domestic demand. According to the federation, gold in India is deeply connected to household savings patterns, particularly in rural regions and during marriage ceremonies.
Arora stated that for millions of families, jewellery is not a speculative investment but a traditional form of financial security stored in wearable assets. He warned that a public appeal discouraging gold purchases could sharply reduce customer footfall, slow manufacturing activity and adversely affect small jewellers, craftsmen and artisans dependent on the sector for survival.
Calling the issue a broader employment concern rather than merely a trade matter, the federation proposed the creation of a dedicated bullion bank, preferably within the Gujarat International Finance Tec-City International Financial Services Centre or the India International Bullion Exchange. The proposed institution would mobilise, standardise and lend domestically held gold within a regulated framework.
The federation also recommended allowing gold exchange-traded funds to lend 20 to 30 per cent of their physical holdings through a regulated bullion banking mechanism. It further called for a major restructuring of the government’s Gold Monetisation Scheme, launched in 2015, arguing that the programme had failed to achieve meaningful scale because of structural shortcomings.
According to AIJGF estimates, a properly functioning bullion banking system could reduce India’s annual gold imports by 200 to 300 metric tonnes over time. The federation maintained that while suppressing jewellery demand would damage employment, mobilising domestic gold reserves could conserve foreign exchange without harming livelihoods.
The organisation urged the government to convene an inter-ministerial consultation to examine long-term solutions for the sector and the economy.
The All India Gem and Jewellery Domestic Council echoed similar concerns, warning that not only jewellers but also related sectors such as retail, logistics and financial services could face economic strain if consumers delay purchases.
GJC Chairman Rajesh Rokde said India already possesses thousands of tonnes of idle household gold that could be unlocked through a transparent and regulated Gold Monetisation Scheme. He stressed that the solution should not rely solely on curbing demand but also on bringing existing gold reserves into productive circulation.
GJC Vice Chairman Avinash Gupta stated that gold has historically carried deep emotional and cultural significance for Indian households. At the same time, he acknowledged the economic challenge of balancing gold demand with national financial stability. Gupta said the industry supports the Prime Minister’s broader economic vision and believes a strengthened Gold Monetisation Scheme could provide a sustainable long-term solution.
Official commerce ministry data showed that India’s gold imports increased by more than 24 per cent to a record USD 71.98 billion in the 2025-26 financial year, compared to USD 58 billion in the previous fiscal year. However, import volumes declined by 4.76 per cent to 721.03 tonnes from 757.09 tonnes.
The ministry stated that the sharp rise in the import bill was driven primarily by soaring gold prices, which climbed to USD 99,825.38 per kilogram in FY26 from USD 76,617.48 per kilogram in FY25. The increase has intensified pressure on India’s trade deficit and current account balance, prompting policymakers to explore measures aimed at reducing non-essential imports.
The growing debate highlights the delicate balance between protecting India’s economic stability and safeguarding an industry that sustains millions of workers, artisans and businesses across the country. As policymakers seek ways to reduce foreign exchange outflows, the jewellery sector is pressing for structural reforms that utilise existing domestic gold reserves rather than weakening consumer demand.
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