Veteran banker Uday Kotak has urged the formation of a dedicated committee to tackle India's escalating gold imports, warning that the nation's outbound gold bill could skyrocket to nearly $90 billion by the fiscal year 2027. Speaking at a conference in New Delhi, the founder of Kotak Mahindra Bank highlighted the severe macroeconomic strain posed by the country's persistent demand for bullion.
India's Gold Import Burden
Kotak's concerns stem from projections indicating that gross gold imports could reach $88-90 billion in FY27. This surge, combined with rising international prices and sustained domestic appetite, threatens to push India's current account deficit (CAD) to an estimated $60 billion in FY27, assuming crude oil prices average around $90 per barrel.
He emphasized how significant gold purchases are to the trade imbalance. “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 stated, underscoring the disproportionate impact of gold on the nation's financial stability.
The banker posed a critical question for policymakers: “Indians and their gold - that is a puzzle we have to find a way to solve.” He suggested that a high-level panel could explore mechanisms to integrate household gold assets into the formal economy while respecting individual savings preferences, thereby reducing the reliance on new imports.
Broader Economic Reforms Needed
Beyond the immediate issue of India gold imports, Kotak addressed wider vulnerabilities in the economy. He advocated for tighter fiscal discipline, noting that consolidated deficit levels currently hover above 7%. “At 7 plus percent consolidated fiscal deficits, we need to get tighter,” he asserted.
Kotak also cautioned against speculative excesses in capital markets, reminding participants that the primary objective of financial markets is capital formation, not merely trading volumes. Furthermore, he encouraged policymakers to leverage global economic volatility to fast-track structural reforms, particularly by scaling up domestic manufacturing to reduce dependence on foreign goods. “The more we can produce and create goods and services which the world wants from us will make us competitive,” he concluded.