Why Modi asked India to stop buying gold ?

At a public rally in Hyderabad on 11 May 2026, Prime Minister of India, Narendra Modi, did something no Indian leader has done so directly in recent memory. He asked ordinary Indians to stop buying gold. It was not a policy change or a regulation by the government, it was a personal appeal from the Prime Minister, to one of the most deeply ingrained financial and cultural habits in the country. The official framing was economic, rooted in the logic that West Asia is at war, oil prices have surged, the Indian basket of crude oil jumped from $69 per barrel in February 2026 to around $109 per barrel by May. India imports 89% of the crude oil it consumes and nearly half of its natural gas. Foreign institutional investors have been pulling dollars out of Indian markets. Net FDI into India has collapsed from appx $43 billion in 2019-20 to just $6.3 billion from April 2025 to February 2026. The rupee is under pressure and the current account deficit is widening. Sitting at second place in India's import bill, right behind oil, is gold. India legally imports 800 to 850 tonnes of gold every year through official channels paying for every kilogram in dollars the country cannot afford to spare. In 2025-26, gold imports alone cost India $72 billion and $84 billion when silver is included, making India the second largest gold importer in the world after China. That is money flowing out of the country to pay for a metal that India does not produce, does not refine at scale, and at the macro level, does not industrially use. The economic case for Modi's appeal is real and urgent. But is it the whole story?

The gold India does not officially import

India's official gold import figures are staggering and do not capture the full picture of the gold flowing into the country. Gold smuggling into India has reached significant scale. Over 3,005 cases in FY 2024-25 yielded 2.6 metric tons seized, with Mumbai emerging as a major hotspot for melting and recasting smuggled gold. These are only the cases that were caught. The routes are well-documented by intelligence agencies. Dubai being the world's largest gold trading hub, sits at the centre of the unofficial supply chain. Gold moves from refineries in the UAE, through networks of couriers, diplomatic channels, and cargo routes, into India's jewellery markets and hawala networks.

The Indo-Myanmar border is another significant corridor, one of the most porous in Asia, already established for narcotics, arms, and human trafficking.

Ajay Veer Singh, Advocate at the Supreme Court of India, has watched this ecosystem from the front lines of India's legal system for three decades. His assessment is unsparing:

In the first place we must understand that gold is a dead investment. It does not support any economic activity or development. It’s a psychological spending. India has already more than 25,000 tons of gold in private hands. Besides the legal import, it is very difficult to say as to how much gold is smuggled into India through the borders with Myanmar, Nepal, Bangladesh, and how much is smuggled through the long sea coast on the east and the western side of the country. The airports are also a very convenient medium of smuggling. According to estimates approximately 200 tons of gold is smuggled every year, the actual quantity maybe much more. We do not count the small quantities which normal visitors bring in the flights. For whatever reasons, the fact is, that we have not been able to stop the gold smuggling in the country. Besides gold the other dead spending is the drug smuggling into the country. The wastage of foreign exchange on gold and drugs is equivalent to the rest of the economy. If any Indian buys gold, he probably may not be aware that the money he pays goes to the other economies and makes India weak. This is actually anti-national. If India has to become a strong country then we should forget to buy the imported and the smuggled gold and stop the drug menace immediately.

The connection that nobody names

The link between gold smuggling and drug financing is not theoretical, it’s operational. Smuggled gold is converted to cash and this cash enters hawala networks. Through this cash, Hawala networks finance drug distribution to the Indian youth. This drug money, generated from sales to Indian youth, cycles back into gold purchases, completing a loop that is simultaneously an economic drain, a public health crisis, and a national security threat.

Afghan heroin and methamphetamine from the Golden Crescent move through the same corridors as smuggled gold bars melted into untraceable wealth. The ecosystem is resilient precisely because its components are mutually reinforcing. As per, Ajay Veer :

The laws are of antiquity and are inadequate to deal with menace of smuggling. The agencies are ill equipped and not trained enough todeal with the magnitude of the problem. The penal code was written long ago and had no idea of what is happening today. BNS has tried to upgrade the law but it is yet to be seen whether it will be able to control the smuggling of gold and drugs into the country.

The dollars India cannot afford to keep spending

At the official level, the arithmetic is straight forward and alarming. India's current account deficit i.e. the gap between the dollars flowing out of the country and the dollars flowing in, is likely to widen sharply in 2026-27. The IMF projected India's current account deficit at $84 billion in 2026. Gold imports at $72 billion represent nearly the entirety of that deficit on their own. Every kilogram of gold imported officially costs dollars that India needs to pay for oil, fertiliser, defence equipment, and the technology imports that power its economic ambitions.

The individual logic of buying gold is sound. It is a hedge against inflation, a store of value, a cultural asset, and a financial security net for millions of Indian households, particularly women, for whom gold often represents the only independently held asset in a marriage. But the aggregate logic is corrosive. India collectively spending $72 billion annually on a metal it does not produce, and,much of it paid for in scarce foreign exchange, some of it flowing through channels that also finance drugs and organised crime. This is a structural problem that no individual purchase decision accounts for.

‍What the legal system sees and what it doesn't ?

India's laws around gold smuggling, hawala transactions, and narcotics financing exist. The legislative architecture is in place with the Prevention of Money Laundering Act, the Narcotic Drugs and Psychotropic Substances Act, the Customs Act. The gap is not in the law, it is in the will and the capacity to follow the chain all the way to its source. Ajay Veer says :

The courts have not failed to implement the laws. Infact the laws are strict in themselves. The reasons of failure are human in nature and not entirely institutional. We would need stronger political will to achieve the goal of stopping the menace of smuggling. The way the Honourable Prime Minister has asked the countrymen not to buy gold for one year, shows a strong political will. I may add to this, that this should continue till we produce our own gold in India.

What this means for the Indian working professionals ?

Modi's appeal landed in the middle of a West Asia crisis. But the forces it was responding to such as, the dollar pressure, the gold dependency, the unofficial economy underneath the official one, were building long before the war began. For India's working professionals, this moment raises questions that go beyond personal finance. The gold purchased at a jeweller, which is officially imported, duty paid, documented is one thing, but the gold that moves through the Indo-Myanmar border, through Dubai hawala networks, through hands that also move narcotics, that is another thing entirely. And the two streams are not as separate as the official economy pretends. Ajay Veer's message to the working people buying gold for investment purpose is clear :

If you want India to be a financial giant and a world power than stop buying anything that India does not produce and which is a dead investment. You are squandering away your hard earned money to buy something that does not make you either rich or strong. It only clogs the financial health of the country. Do not buy gold and stop drugs. We all have to fight together. It’s not the duty of only the government. We all have the duty to contribute to make the country strong.

The signal in the appeal

Modi's ask was framed as economic patriotism. At one level, it is exactly a request to ease pressure on the rupee during a moment of genuine external stress. But the deeper reading is harder. And it is the reading that matters most to the professional sitting with this piece right now. Because the person most implicated in this conversation is not the government or the smuggler on the Indo-Myanmar border or the hawala operator in Dubai. It is the ordinary, educated, working Indian who buys gold at a jeweller without knowing what that purchase is connected to. Who saves in gold because it feels safe, feels cultural, feels like the right thing to do. Who has never been told, plainly, what those savings are sometimes funding downstream.

Wocult exists to have the conversations that working professionals deserve to have — uncomfortable, unfiltered, unsanitised — the version that enables them to make better decisions. This is one of those conversations. The rupee will stabilise, oil prices will eventually moderate, the war will end. But the gold-hawala-drug loop that Ajay Veer Singh has watched from the Supreme Court of India for thirty years will not end on its own. It ends when enough people understand what they are participating in and choose differently. As Ajay Veer puts it :

We all have to fight together. It's not the duty of only the government. We all have the duty to contribute to make the country strong.

That is not a political statement, it is a personal appeal addressed, directly, to you for your own benefit.

A note on Gold ETFs (Exchange Traded Fund) : Readers may ask whether Gold ETFs carry the same concerns as physical gold. The short answer is - not directly. ETFs are SEBI-regulated, digitally traded, and do not participate in the smuggling or hawala ecosystem described in this piece. If you hold gold as a financial hedge, an ETF is a more responsible instrument.

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About Ajay Veer Singh

With about three decades of experience in the legal field, Ajay Veer Singh is a seasoned lawyer and managing partner at BSJ Legal Law Offices,a law firm specializing in Supreme Court of India law practice. Ajay Veer Singh has been a member of the Supreme Court Bar Association since 2000, demonstrating his commitment to uphold the highest standards of legal ethics and professionalism. His expertise lies in litigation, constitutional law, and arbitration, which he has honed through extensive practice and continuous learning. He has also pursued further education at Harvard Law School, where he studied negotiation, and at Jawaharlal Nehru University, where he studied for Master's degree in History. His diverse educational background has equipped him with a unique perspective and a deep understanding of the legal landscape. He is passionate about delivering exceptional legal services to his clients and contributing to the advancement of the legal profession.

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Sources

Expert commentary: Ajay Veer Singh, Managing Partner, BSJ Legal Law Offices, Supreme Court of India.
Ministry of Petroleum & Natural Gas, Government of India — Indian Crude Oil Basket price data, February–May 2026.(Corroborated by Petroleum Planning & Analysis Cell, PPAC.gov.in)
BP Statistical Review of World Energy 2025; Ministry of Petroleum & Natural Gas Annual Report 2025-26.
Department for Promotion of Industry and Internal Trade (DPIIT), Government of India — FDI Statistics, April 2025–February 2026.
Metals Focus / World Gold Council — India Gold Demand Report, FY 2025-26.(Corroborated by Commerce Ministry export-import data, dgft.gov.in)
World Gold Council — Gold Demand Trends Report, FY 2025-26.
Directorate of Revenue Intelligence (DRI), Annual Report 2024-25, Ministry of Finance, Government of India.
Gold Smuggling in India: How the Network Operates, 2025.
Narcotics Control Bureau (NCB), India — Annual Report 2024-25.United Nations Office on Drugs and Crime (UNODC) — Afghanistan Opium Survey 2025.
International Monetary Fund — World Economic Outlook, April 2026. imf.org
Financial Intelligence Unit India (FIU-IND) — Annual Report 2024-25, Ministry of Finance.Directorate of Enforcement (ED) — PMLA Annual Report 2024-25.
Prevention of Money Laundering Act, 2002 (as amended).Narcotic Drugs and Psychotropic Substances Act, 1985 (as amended).Customs Act, 1962 (as amended).Bharatiya Nyaya Sanhita (BNS), 2023.

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