Sankat Kaal: Gold, Climate, and the Limits of State Persuasion

Somewhere in Secunderabad , the Prime Minister of India who arrived by helicopter told a crowd of thousands to take the bus.

Narendra Modi, speaking at the Parade Grounds on May 10, declared we are living in a Sankat Ka Kaal , a time of crisis. His prescription was to stop buying gold for one year. Cut your cooking oil. Skip the foreign vacation. Use less fertilizer. Take the metro, Carpool and Work from home. Do your patriotic duty, which apparently now involves not buying your daughter’s wedding jewellery.

The crowd clapped. The gold market dropped 2%. Twitter went feral. And the most important economic signal India’s Prime Minister has sent in a decade got processed by the media as a lifestyle appeal.

It wasn’t.

India’s foreign exchange reserves are under stress. The West Asia conflict is jacking up crude prices. El Niño is coming for the monsoon. The current account deficit is widening. And the one thing the government cannot control, the thing that bleeds $72 billion out of India’s dollar reserves every single year, is your mother’s love for 22-karat bangles.

Gold imports hit an all-time high of $71.98 billion in FY 2025-26. That’s not a trade deficit. That’s a wedding season.

The “don’t buy gold” line is the headline. The real story is the sentence nobody flagged where PM urged to reduce dependence on chemical fertilizers by 50%. That’s not a lifestyle suggestion. That’s a pre-emptive economic brace position. The IMD has forecast the southwest monsoon at 92% of the Long Period Average. There’s a 35% probability of deficient rainfall , more than double the historical norm. El Niño is developing in the Pacific. Sixty percent of Indian farmers depend on monsoon rain for kharif crops. If the monsoon fails, food prices spike.

If food prices spike, the RBI can’t cut rates. If the RBI can’t cut rates, growth stalls. If growth stalls during a time when crude is expensive and the rupee is already under pressure… well, you see where this is going.

Modi isn’t asking you to save the economy. He’s asking you to adjust your expectations before the numbers land so when they do, the crisis feels like something you were already handling, not something his government failed to prevent.

This is pre-emptive blame distribution. The sacrifice is real. The question of who’s sacrificing what is left artfully unspecified.

India has tried to make its citizens stop buying gold before. It went about as well as you’d expect.

In 1962, after the Indo-China war emptied the treasury, Finance Minister Morarji Desai introduced the Gold Control Rules. By 1968, these became the Gold Control Act, a sweeping ban on gold bars, coins, and jewellery above 14 karats. The state literally told Indian households: you may not own gold in the form you want it.

What happened next is a masterclass in why governments lose arguments against grandmothers.

The official gold market collapsed. The black market exploded. Smuggling syndicates built networks from Dubai to Bombay that moved tonnes of gold through dhows, fishing boats, and diplomatic bags. The Sunar community, traditional goldsmiths who had worked with gold for centuries, lost their livelihoods overnight. Tax revenue vanished into cash transactions. And India’s gold consumption didn’t decrease. It just became invisible.

Dubai, incidentally, owes a significant chunk of its gold souk economy to this period. India’s attempt to ban gold imports didn’t reduce Indian demand. It built the infrastructure of an entire Gulf trading city. The Gold Control Act was repealed in 1990 by which point India was in a balance-of-payments crisis so severe it had to pledge its gold reserves to the Bank of England just to stay solvent.

The irony of that sequence deserves its own paragraph. India tried to stop people from buying gold, failed resulting in smuggling empire, and then had to mortgage the country’s gold to survive the economic crisis the whole policy was meant to prevent.

That was 1962. It is now 2026. The Finance Minister is different. The verb has changed from ban to request. But the underlying logic is identical: India is spending too many dollars on gold, the reserves are stressed, please stop.

Indians buy gold because they don’t trust the state. Gold doesn’t depreciate when the government changes monetary policy. Gold doesn’t get frozen when a bank collapses. Gold doesn’t disappear during demonetization. Gold is what you hold when you’ve been burned by every other promise the republic has made to you about the safety of your money.

India’s forex reserves stand at $691 billion. That sounds comfortable until you realize gold imports alone consume $72 billion a year and crude oil takes another chunk. A recent report by HSBC noted that Indian households’ total gold holdings are estimated at about 25,000 tonnes, more than the combined reserves of the world’s top 10 central banks (including the US, Germany, Italy, France, Russia, China, Switzerland, Japan, and Turkiye).

It’s sitting in Indian homes, in safes, in bank lockers, in the specific drawer your grandmother told you about on her deathbed.

It’s not savings. It’s a civilizational insurance policy against every government that has ever said trust us.

No Indian government, not Congress, not BJP, not the Janata experiments in between has ever successfully convinced Indian households that the financial system is a better store of value than gold. That’s not a party failure. That’s a state failure. It’s 79 years of independence and the republic still hasn’t earned enough trust to compete with a yellow metal.

This is the ticking clock: El Niño plus West Asia conflict plus weakening rupee plus an election cycle that just ended and therefore provides maximum political runway for painful policy. If the monsoon is deficient, the government will need to import more grain, more cooking oil, more fertilizer, all of which cost dollars. Those dollars come from the same reserves that gold imports are draining.

Modi’s speech wasn’t an appeal. It was a weather forecast in political clothing.

The question isn’t whether Indians will stop buying gold. They won’t. Morarji Desai couldn’t make them. Manmohan Singh couldn’t make them. Narendra Modi, speaking from a helicopter’s walk to a parade ground, certainly won’t make them.

The question is why, after 79 years, the Indian state still thinks the problem is the gold and not the reason people buy it.