Behind PM Modi's austerity call: dipping foreign exchange reserves, rising gold imports

📌 Summary:

• India's forex reserves have plummeted by USD 38 billion in two months since the onset of the West Asia conflict, now at USD 691 billion

• Crude oil prices hovering over USD 100/barrel — heightening pressure on the external sector

• Behind PM Modi's austerity appeal: foreign exchange outflows linked to higher gold imports and overseas travel spending under LRS

• Gold imports nearly doubled in 2 years — USD 72 billion in 2025-26 (India is world's 2nd-largest gold consumer after China)

• LRS (Liberalised Remittance Scheme) outflows: USD 26.34 billion in first 11 months of FY26; foreign travel accounts for USD 15 billion (57%)

• FII outflows in Jan-May: ₹1.97 lakh crore amid global uncertainty

• Current account deficit (CAD) rose to USD 13.2 billion (1.3% of GDP) in Dec quarter (RBI, 2 March 2026 release)

• Switzerland: 40% of India's gold imports; UAE 16%; South Africa ~10%; Swiss imports up 11.36% to USD 24.27 billion in 2025-26

• PM's appeal: cut petroleum and gold purchases, use public transport, avoid foreign travel — to conserve forex

🎯 UPSC Relevance: GS Paper 3 — Indian Economy (External Sector, BoP, CAD, monetary policy response); GS-2 government policy responses

📝 Prelims Facts:

• Current forex reserves: ~USD 691 billion (down USD 38 bn in 2 months)

• Gold imports FY26: ~USD 72 billion (India 2nd-largest gold consumer)

• LRS outflow Apr 2025-Feb 2026: USD 26.34 bn; foreign travel: USD 15 bn (57%)

• CAD Dec quarter: USD 13.2 bn = 1.3% of GDP

• Top gold sources: Switzerland (40%), UAE (16%), South Africa (10%)

🔑 Key Term: LRS (Liberalised Remittance Scheme) — RBI window allowing resident individuals to remit up to USD 250,000 per financial year abroad for permissible current and capital account transactions