India’s Forex Reserves Slip $38 bn as Modi Curbs Gold Buying and Fuel Use

Context The Strait of Hormuz, through which roughly a third of global oil shipments pass, has been largely closed for more than two months as the Iran conflict continues. India imports about 90 % of its crude oil, so the disruption has lifted its import bill and drained dollars from the reserve pool. At the same time, gold remains a traditional store of value for Indian households, and higher demand for the metal adds further pressure on foreign‑exchange supplies. To curb these outflows, policymakers have tightened the two levers they control most directly: import duties on precious metals and domestic fuel pricing.

Key Facts - Reserve levels: India’s forex stock stood at roughly $690 billion before the war; it is now down $38 billion, a 5.5 % reduction that leaves enough coverage for about 10.5 months of imports. - Gold duty: The import tariff on gold and silver was lifted from 10 % to 15 %, making landed costs rise by approximately ₹1 500 per 10 grams, based on current spot prices. - Fuel price: Delhi retail petrol and diesel were increased by three rupees per litre, pushing the pump price from about ₹101 to ₹104, a 3.2 % increase that mirrors the rise in Brent crude, which traded near $100 /barrel (ticker: BRENT=OIL). - Market reaction: The Nifty 50 (^NSEI) slipped 1.4 % to 22,350 points, the Sensex (^BSESN) fell 1.2 % to 73,800, and the USD/INR rate (USDINR=X) moved from 83.10 to 83.45, a 0.4 % rupee weakening. Reliance Industries (RELIANCE.NS) held a market cap of roughly ₹19 trillion, unchanged on the day.

What It Means Higher oil prices raise the dollar outlay for each barrel imported, while the gold duty increase aims to make the metal less attractive for speculative buying, thereby conserving reserves. The fuel price hike passes part of the cost to consumers, reducing the subsidy burden on the government budget. Analysts watch whether the combined measures can slow the reserve drain enough to keep the rupee above 84 per dollar and avoid a wider current‑account gap. What to watch next: RBI’s next monetary policy meeting (scheduled for early April) for any shift in the repo rate, and monthly trade data due out in late March that will reveal if oil and gold imports are beginning to ease.