The government further imposed a 100 kg cap on gold imports under the Advance Authorization (AA) scheme, which allows jewellery exporters to import raw materials duty-free.

• The Advance Authorisation Scheme is a trade facilitation measure by the Directorate General of Foreign Trade (DGFT) that allows duty-free import of raw materials to manufacture export products.
• These measures were taken following Prime Minister's appeal to avoid buying gold for a year to ease pressure on Indian foreign exchange reserves.

Impact of rising gold demand on Indian Economy

• Trade Deficit: India's merchandise trade deficit reached $333.2 billion in FY26, a significant rise from $284.5 billion the previous year. 
  • India's gold imports in FY26 totaled $71.98 billion, marking a 24.08% increase year-on-year.
• Increased Current account deficit (CAD): Due to rising trade deficit in its April 2026 projections, the IMF said India’s current account deficit could widen in 2026 roughly around 2% of GDP.
  • Current account deficit refers to the situation where a country's total imports of goods, services, and transfers exceed its total exports and transfers out.
• Depreciates Indian Rupee: As a result imports become costlier and it force RBI to use foreign exchange reserves to stabilize the currency.
• Dead Capital: As gold stored privately remains outside the formal financial system and cannot support investment, infrastructure, or job creation.