As the Indian rupee quickly depreciates against the US dollar, Union Minister Piyush Goyal said the government is considering several steps to contain the widening Current Account Deficit (CAD).
"We are monitoring the situation. All the various arms of the government are working as a team. Several steps are under consideration. The situation globally is quite challenging but we have the confidence and courage of conviction that we will come out winners even in this challenging time," the commerce and industry minister told reporters in Delhi.
India's CAD rose to $13.2 billion, or 1.3% of the GDP in the December quarter, from $11.3 billion in the year-ago period. This was primarily due to a wider trade gap caused by a decline in exports to the US, according to data released by the Reserve Bank of India on 2 March.
CAD occurs when the value of goods and services imported exceeds the value of goods and services exported by a country in a particular period.
What is increasing India's CAD
Increasing imports of gold and silver are contributing to the widening trade deficit and CAD. Gold imports rose 24% to hit an all-time high of $71.98 billion in 2025-26. In terms of volume, however, the imports dipped 4.76% to 721.03 tonnes.
Similarly, silver imports jumped about 150% to $12 billion in the last fiscal. In volume terms also, it rose by 42% to roughly 7,335 tonnes in 2025-26.
The rise in imports of these precious metals in April has pushed the country's trade deficit (difference between imports and exports) to a three-month high of $28.38 billion.
Gold prices are currently hovering around ₹1,56,000 per 10 grams (inclusive of all taxes) in Delhi, whereas silver was priced at around ₹2.53 lakh per kg.
To discourage imports of these precious metals and contain dollar outflow, the government significantly increased import duty to 15% from 6% earlier. With the 3% IGST, the effective duty is 18.45%.
The government has also imposed a limit of 100 kg on gold imports under the Advance Authorisation scheme, which allows jewellery exporters to import raw or input materials at zero duty.
Measures like issuing Quality Control Orders (QCOs) on products also help in discouraging imports.
A tumbling rupee
The Indian rupee's sharp decline has emerged as one of the biggest economic warning signs for policymakers, investors and businesses.
Once considered among Asia's more stable currencies, the rupee has now become one of the worst-performing emerging market currencies this year, pressured by a toxic mix of expensive oil, capital outflows, widening trade deficits and a surging US dollar.
It has depreciated about 7% so far in 2026 and is down roughly 6.1% since the outbreak of the Iran conflict in late February.
India imports more than 88% of its crude oil requirements. Each rise in global oil prices directly increases the demand for dollars because Indian refiners must buy more dollars to pay for imported crude.
As oil prices continue to surge with peace negotiations between Iran and the US going nowhere, the pressure on the rupee has intensified. When crude prices rise, India's import bill expands, demand for dollars increases, and the trade deficit widens. That creates sustained downward pressure on the rupee.
Amid rising geopolitical tensions, Foreign Portfolio Investment (FPI) outflows are also putting pressure on the rupee.
Falling domestic currency puts pressure on government coffers as interest payment of foreign loans goes up while overseas borrowing by financial institutions becomes costlier.
PM Modi's appeals
Meanwhile, Goyal said, "We have made an appeal to all the citizens of India to be more conscious about their spending on products which are import-dependent. And I think it's just very natural that every Indian who trusts Prime Minister Modi has taken cognizance of that and is helping the country in every small or big way with their own actions."
On India-GCC (Gulf Cooperation Council) free trade agreement talks, he said the first round of talks will happen in the second half of 2026.
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