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Zoho founder Sridhar Vembu has called for a rethink of how India’s gold imports are reflected in its external accounts, arguing that annual gold purchases should be excluded from the current account deficit and the value of accumulated gold imports subtracted from net external debt. His comments come as gold remains one of the key drivers of India’s import bill and trade deficit.
In a post on X, Vembu said India’s imports of gold should be viewed differently from its imports of oil.
“India imports a lot of oil and a lot of gold. We are investing in renewables to reduce our oil dependency. But gold is a different matter,” Vembu said.
“Oil is a consumable but gold is a long term asset that retains its value in the global markets,” he added.
Vembu argued that gold purchased by Indian households becomes part of the country’s accumulated wealth, even as the initial import is recorded as an external outflow.
“Gold sits in our household balance sheet as an asset and is not reflected in our national accounts. But the imported price paid is reflected as an outflow in our annual balance of payments,” he said.
He suggested that India should publish a measure of its current account deficit excluding annual gold purchases to provide a different view of the country’s external finances.
“It may be useful to state our current account deficit excluding our annual gold purchase so that we get a better idea of the real debt picture,” Vembu said.
“And the sum of gold imports (at the purchase price, conservatively) should be subtracted from net external debt. That will give us a truer picture of our national balance sheet,” he added.
India’s trade deficit jumps 430%
The debate comes as India’s overall trade deficit widened sharply in June.
India’s total trade deficit rose to $15.32 billion in June 2026 from $10.51 billion in May, according to government data. Total exports of goods and services rose 9.5 per cent year-on-year to $73.44 billion, while imports increased nearly 27 per cent to $88.76 billion.
The wider deficit was driven by a sharp increase in the merchandise trade gap. India’s merchandise exports stood at $40.41 billion in June, while merchandise imports reached $70.84 billion, resulting in a goods trade deficit of $30.43 billion.
The latest figures underline the importance of oil, gold and other commodities to India’s external balance. The value of oil imports stood at $19.33 billion in June, down from $22.68 billion in May, while gold imports declined to $1.97 billion from $3.42 billion over the same period.
Despite the month-on-month decline in oil and gold imports, India’s overall merchandise import bill remained high, with imports of electronic and electrical goods also contributing to the increase.
The June data showed the contrast between the merchandise and services sides of India’s external accounts. Services exports were estimated at $33.03 billion, while services imports stood at $17.92 billion, resulting in a services surplus of $15.11 billion.
For April-June, India’s overall exports of goods and services rose 11.37 per cent year-on-year to $232.73 billion. Total imports during the period grew 17.55 per cent to $270.15 billion.
Why gold imports matter for India’s external accounts
Gold is one of the largest components of India’s merchandise import bill. A surge in gold purchases can widen the country’s trade deficit and put pressure on its current account.
But Vembu’s argument is that gold should not be viewed in exactly the same way as crude oil.
Crude oil is imported, processed and largely consumed as fuel or used as an industrial input. Gold, by contrast, remains in the economy as jewellery, bars, coins or other forms of physical wealth.
In other words, the import creates an immediate foreign exchange outflow, but the underlying asset remains in India.
This raises a broader question: Should the external cost of importing gold be assessed alongside the wealth created by the stock of gold that remains in the country?
Vembu’s proposal is to publish a separate measure of the current account deficit that excludes annual gold purchases.
India’s gold wealth is difficult to measure
India has accumulated a vast stock of household gold over decades. However, estimating the exact value of privately held gold is difficult because much of it is held outside formal financial systems.
Gold may be held as jewellery, inherited across generations or stored as bars and coins. Unlike bank deposits, equities or bonds, these holdings are not captured through a central registry.
This creates a difference between the annual flow of gold imports and the accumulated stock of gold wealth.
The import of gold creates a foreign exchange outflow in the year it enters the country. But the gold itself remains an asset that can retain or increase its value over time.
This is the central point behind Vembu’s argument that India’s external accounts show the outflow associated with gold imports but do not provide an equally visible picture of the value of the gold accumulated by households.
Why Vembu’s proposal could be controversial
Vembu’s proposal is likely to trigger debate among economists because the current account is designed to record transactions between residents and the rest of the world during a particular period.
The purchase of imported gold represents a transaction with the rest of the world and is therefore recorded as an import. The fact that the gold later becomes an asset does not necessarily mean the original import should be removed from the current account.
The current account and a national balance sheet measure different things.
The current account records economic flows over a period. A balance sheet records accumulated assets and liabilities at a point in time.
Therefore, excluding gold imports from the current account would not change the fact that foreign exchange was spent to purchase the metal.
The more useful question may be whether India should publish additional indicators alongside the conventional current account deficit.
For instance, policymakers and analysts could examine the CAD excluding gold imports while separately tracking the value of household gold assets. Such a measure could provide additional insight into the difference between India’s annual external financing needs and the wealth accumulated through gold ownership.
Gold versus oil
The distinction between gold and oil is central to Vembu’s argument.
India imports large quantities of crude oil, which is then refined and consumed as fuel or converted into petrochemical products. The country must continue importing oil to meet its energy needs unless domestic production or alternative energy sources replace it.
Gold is different because it is not consumed in the same way.
India’s annual gold imports add to the country’s stock of physical wealth. However, gold does not automatically generate income or productive output. It can also represent capital locked away in households rather than invested in businesses or financial assets.
This is why economists have long debated whether gold imports are simply a drain on India’s foreign exchange or also represent the accumulation of household wealth.
The distinction is particularly relevant at a time when India’s import bill is under pressure from geopolitical tensions and commodity prices. Elevated crude prices can widen the trade deficit rapidly, while gold imports can fluctuate sharply depending on prices, domestic demand and investment sentiment.
In June, the merchandise trade deficit widened to $30.43 billion, while the services surplus provided a significant offset to the overall trade gap. Economists have warned that elevated commodity prices could put further pressure on India’s current account deficit in FY27.
‘A truer picture of our national balance sheet’
Vembu’s proposal comes amid renewed attention to India’s external vulnerability, with oil prices, gold prices, foreign portfolio flows and the rupee all influencing the country’s balance of payments.
His argument is not that gold imports do not involve a foreign exchange cost. Rather, it is that the cost should be viewed alongside the asset that remains in India after the import.
“India’s assets remains hidden but the liability is plainly visible,” Vembu said.
“It may be useful to state our current account deficit excluding our annual gold purchase,” he added, arguing that the measure could offer a better view of India’s “real debt picture”.
The debate highlights a larger question about how countries measure economic strength.
Traditional macroeconomic indicators focus heavily on flows such as imports, exports, deficits and debt. But household wealth, including physical assets such as gold, is harder to measure.
For India, where gold is deeply embedded in household savings and investment patterns, Vembu’s comments could fuel a debate over whether the country needs a more comprehensive picture of its national balance sheet — one that captures not only the foreign exchange spent on imported gold, but also the value of the metal accumulated by Indian households over time.
