Veteran banker Uday Kotak warns India’s gold imports could rise to $88-90 billion; says ‘Indians and their gold – that is a puzzle we have to find a way to solve’

Uday Kotak on Friday said India needs to find a way to address its high gold imports.

India’s gold imports have been in focus since the start of the US-Iran war as they add pressure to the country’s import bill at a time when oil is also rising and rupee is depreciating.Amid this, veteran banker and Kotak Mahindra Bank founder Uday Kotak on Friday said India needs to find a way to address its high gold imports, warning that the country’s gross gold import bill could rise to $88-90 billion in FY27. He also suggested that a committee could be formed to examine the issue.Speaking at the Conference on Financing India’s Journey Towards Viksit Bharat, attended by Finance Minister Nirmala Sitharaman and finance ministers of states and Union Territories, Kotak said the gold held by Indian households may be substantial individual wealth but has not been channelled into productive economic use.

Rising gold import bill

“For FY26, the current account deficit of India was 25 billion dollars. So we had our current account deficit very controlled. Gold imports gross in one year is 72 billion. Therefore, if you exclude gold, India had a current account surplus,” Kotak said.Based on estimates available to him for the ongoing financial year, Kotak said India’s current account deficit could be around $60 billion if oil prices averaged about $90. At the same time, he estimated that gold imports could climb to $88-90 billion.“Indians and their gold – that is a puzzle we have to find a way to solve,” he said. Kotak suggested that a committee could be considered to work out a solution that takes into account people’s requirements while also addressing the country’s capital and current account challenges.Kotak also argued for greater fiscal consolidation, pointing out that India’s consolidated fiscal deficit was still above 7 per cent.“At 7 plus percent consolidated fiscal deficits, we need to get tighter,” he said, while recognising the fiscal pressures confronting both the central government and the states.Discussing the financing of India’s economic growth, Kotak said the country had progressed considerably from the traditional saver-to-borrower model towards an investor-to-issuer framework supported by capital markets.At the same time, he cautioned against excessive financialisation. According to Kotak, capital markets should ultimately serve the purpose of capital formation rather than becoming primarily centred on trading activity, volumes and market movements.“At times when the objective of capital formation gets lost and we focus on just markets, volumes and trading, we at times run the risk of missing the key reason why we have financial markets,” he said.Kotak said the uncertainty prevailing across the global economy should be treated by India as an opportunity to accelerate both reforms and investment.“There is a global crisis and the principle of a global crisis is never waste a crisis. We must make full use of the crisis and implement measures at speed and alacrity,” he said.He stressed the need for India to expand its production of goods and services that have demand in global markets, while simultaneously cutting its reliance on other countries for critical goods and services.“Our dependence on goods and services from others exposes us. The more we can produce and create goods and services which the world wants from us will make us competitive,” Kotak said.For the financial sector, he advocated maintaining an appropriate balance between regulation and development. Regulators, he said, need to safeguard the stability of the system without restricting its growth.Kotak also said that when wrongdoing takes place, action should be directed at the individuals responsible, while financial institutions that become victims of such misconduct should be protected.With global trade, geopolitical and financial pressures continuing, Kotak said India should guard against complacency and improve coordination between the Centre and the states.“The more we get together and make ourselves as a single nation, the more we will be able to withstand the challenges which face the world at large,” he said.