APPSC Current Affairs May 13th 2026

External Sector Pressure on India

India’s external sector is facing pressure from several directions. Forex reserves reportedly fell by about $38 billion in two months since the onset of the West Asia conflict, reaching around $691 billion. At the same time, crude oil prices remained above $100 per barrel, adding pressure on India’s import bill.

The pressure is also visible in capital flows and currency movement. Foreign Institutional Investors sold heavily in Indian markets, with FII outflows of about ₹1.97 lakh crore during January–May. The rupee also weakened, falling below the 95 per US dollar level.

This situation has raised concerns because India depends heavily on imports for crude oil, gold, edible oils and fertiliser-related inputs. Higher imports require more dollars, which can weaken the rupee and widen the current account deficit.

PM’s Austerity and Self-Reliance Call

Addressing a public meeting in Hyderabad, the Prime Minister called for collective citizen participation during global disruptions caused by the West Asia conflict.

He urged citizens to:

• Use metros, public transport and carpooling
• Increase use of electric vehicles
• Use railways for goods transportation
• Revive work-from-home, virtual meetings and video conferencing
• Avoid non-essential foreign travel for at least one year
• Postpone discretionary gold purchases for a year
• Prioritise locally manufactured goods
• Reduce edible oil consumption by 10%
• Reduce dependence on chemical fertilisers and promote natural farming

The broader message was linked to foreign exchange conservation, self-reliance, and reduced dependence on imported goods.

Gold Imports and Forex Outflow

Gold has become a major source of foreign exchange outflow. India is not a major gold producer and imports most of its gold. Gold imports rose by about 24% to nearly $71.98 billion in 2025–26. In two years, the gold import bill almost doubled from about $35 billion in 2022–23 to around $72 billion in 2025–26.

India is the world’s second-largest gold consumer after China. The jewellery sector is a major driver of this demand. However, large household gold purchases increase dollar outflows and can add pressure on the current account deficit. India’s current account deficit stood at $13.2 billion, or 1.3% of GDP, in the December quarter.

There is also a distinction between RBI gold reserves and household gold imports. The RBI has added gold as part of reserve management, with gold reserves rising to about 880 tonnes by March 2026. Gold now forms about 16% of India’s forex reserves, compared with 10% earlier. But household gold imports directly increase dollar demand.

Switzerland remained the largest source of India’s gold imports, accounting for around 40%, followed by the UAE and South Africa. Imports from Switzerland rose to about $24.27 billion in 2025–26.

Gold Monetisation as a Solution

The News article highlights the need to unlock the value of idle household gold through the Gold Monetisation Scheme. Instead of keeping gold locked in homes and lockers, it can be brought into the formal economy. This can reduce imports, ease current account pressure and strengthen the financial system.

LRS, Foreign Travel and Tourism Imbalance

Another major source of foreign exchange outflow is overseas spending under the Liberalised Remittance Scheme. A large share of LRS outflows is linked to foreign travel.

Outward remittances under LRS stood at $29.56 billion in FY25, with travel accounting for more than half of the outflow at about $16.96 billion. In the first 11 months of FY26, LRS outflows remained high, with foreign travel accounting for nearly $15 billion, or about 57% of total LRS outgo.

The Prime Minister also pointed to the rising culture of foreign weddings, foreign vacations and overseas travel among the middle class. He urged citizens to postpone non-essential foreign travel during the present period of external pressure.

The tourism data also shows an imbalance. Indian national departures reached about 32.71 million in 2025, up from 30.89 million in 2024. In contrast, foreign tourist arrivals in India fell to about 9.02 million in 2025. Foreign exchange earnings from tourism stood at about ₹2.74 lakh crore, down from the previous year. Tourism remains important because it contributes to GDP and provides employment to crores of people.

Crude Oil and Petroleum Dependence

Crude oil is one of India’s biggest external vulnerabilities. India imports about 89% of its oil needs. With crude prices rising from around $70 per barrel to above $100 per barrel, India’s dollar outflow for oil imports increases sharply.

The West Asia conflict has created uncertainty around oil supply routes, especially the Strait of Hormuz. Even without a direct supply disruption, such uncertainty can keep oil prices high and volatile.

High crude prices affect India in three major ways:

• They widen the current account deficit
• They create inflationary pressure
• They increase losses or under-recoveries for oil marketing companies

State-owned oil marketing companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum are reportedly facing under-recoveries of about ₹30,000 crore per month on petrol, diesel and cooking gas. If prices are raised, the impact may spread through diesel-based freight transport and raise the prices of daily goods.

The Prime Minister therefore encouraged citizens to use public transport, metros, carpooling and EVs to reduce petroleum consumption.

Edible Oils and Fertilisers as Pressure Points

Edible oils are another major import-dependent category. India imports palm oil mainly from Indonesia and Malaysia, and sunflower oil from Russia and Ukraine. The Prime Minister urged households to reduce edible oil use by 10%, presenting it as both an economic and public health measure.

However, edible oil is a daily essential. Unlike gold, its consumption cannot be postponed easily. Domestic alternatives such as mustard oil exist, but they cannot immediately replace large imports. Regional food habits also make a quick shift difficult.

Fertilisers are another pressure point. The Prime Minister urged reduced use of chemical fertilisers and promotion of natural farming. Imported fertiliser prices have risen sharply. Urea prices rose from about $508 per tonne to $935 per tonne, while DAP and ammonia prices also increased significantly.

India’s fertiliser vulnerability is linked to West Asia. Around 75% of urea imports come from Gulf Cooperation Council countries. Domestic urea plants also depend on LNG, much of which comes from countries such as Qatar, UAE and Oman through the Strait of Hormuz. Any disruption can affect both fertiliser imports and domestic production.

For the coming kharif season, India needs about 19.4 million tonnes of urea, while available stocks in early April were only about 5.5 million tonnes. If supplies are not replenished, higher input costs may eventually increase food prices.

Additional Context from Hyderabad Speech

The Prime Minister also referred to recent election outcomes and political developments during the Hyderabad rally. He stated that Telangana had benefited from central government projects and said the State would develop along with the country. For exam purposes, however, the main relevance of the speech lies in its economic message on austerity, forex conservation, import reduction and self-reliance.

Significance

1. External Sector Stability

Reducing unnecessary imports and foreign spending can help conserve foreign exchange reserves and reduce pressure on the rupee.

2. Current Account Management

Lower gold, crude and edible oil imports can reduce pressure on the current account deficit.

3. Inflation Control

Crude oil, fertilisers and edible oils directly affect transport, agriculture and food prices. Import cost reduction can help contain inflationary pressure.

4. Energy Security

Lower petroleum dependence through EVs, public transport and work-from-home can improve energy security.

5. Self-Reliance

The call to prefer local goods supports the broader idea of Vocal for Local and domestic manufacturing.

6. Public Health Co-benefits

Reducing edible oil consumption and encouraging public transport can also support better health outcomes.

Challenges

• Gold has strong cultural and investment value in Indian households.
• Foreign travel has grown rapidly among the middle class.
• India’s crude oil import dependence is very high.
• Edible oil imports are difficult to reduce quickly due to daily consumption needs.
• Fertiliser supply is vulnerable to West Asian disruptions.
• Public behaviour change is difficult without incentives and awareness.
• Sudden fuel price hikes may increase inflation.
• Tourism imbalance remains a concern as outbound travel is rising faster than inbound arrivals.

Way Forward

• Strengthen and popularise the Gold Monetisation Scheme.
• Encourage public transport, metro use, carpooling and EV adoption.
• Promote responsible foreign travel and reduce non-essential overseas spending.
• Support local manufacturing through Vocal for Local.
• Reduce edible oil consumption through awareness and health campaigns.
• Promote natural farming and balanced fertiliser use.
• Improve domestic capacity in edible oils and fertilisers over time.
• Increase inbound tourism to improve foreign exchange earnings.
• Use work-from-home and virtual meetings where practical to reduce fuel use.

Conclusion

The Prime Minister’s austerity call reflects India’s concern over rising external sector pressure. High gold imports, crude oil dependence, LRS-linked foreign travel spending, edible oil imports and fertiliser vulnerabilities are increasing the demand for foreign currency.

A balanced response requires both citizen participation and structural reforms. Responsible consumption, local production, gold monetisation, energy conservation, EV adoption, natural farming and stronger domestic capacity can help India protect its forex reserves and strengthen economic resilience during global uncertainty.