Executive Summary –
Following Prime Minister Narendra Modi’s appeal to refrain from purchasing gold for one year, the demand for gold has plummeted in the Southern Indian states, which are traditionally considered the largest consumers of the yellow metal.
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The country is witnessing an unprecedented transformation in its economic and political landscape, catching everyone from business analysts to political୮+ strategists by surprise. South India, traditionally considered the biggest stronghold of precious metals in the country, has recorded a massive decline in gold demand. According to financial data, gold demand within the country has dropped from approximately 25 tonnes in the same period last year to a mere 7.5 tonnes in the recently concluded fortnight. This 70 percent sharp decline in the market is being attributed primarily to the increase in import duty by the Central Government, coupled with a special public appeal made by Prime Minister Narendra Modi. This economic shift has sparked a new debate regarding the growing influence of the Bharatiya Janata Party in the Southern states.
This major economic development began when the Central Government, with the objective of securing the country’s foreign exchange reserves, increased the import duty on gold directly from 6 percent to 15 percent. Immediately following this policy decision, Prime Minister Narendra Modi made an emotional appeal to the countrymen, especially the citizens of South India, from a massive public rally platform held in Secunderabad, Telangana. The Prime Minister stated in his address that our patriotism calls upon us to save foreign exchange; therefore, in the national interest, we must take a pledge that for the next one year, regardless of any auspicious occasion at home, we will refrain entirely from buying new gold ornaments.
According to a recent report by ‘The Economic Times,’ the deepest and most widespread impact of the Prime Minister’s appeal is being seen in those Southern states that are generally not considered traditional bastions of the BJP. Bhima Jewellery Chairman B. Govindan, describing the ground reality of the market, stated that consumers are not exceeding their set budget limits at this time. They are choosing extremely light and lower-carat ornaments. Conversely, there is an unprecedented competition among consumers to sell old gold to acquire cash. Similarly, Surendra Mehta, National Secretary of the India Bullion and Jewellers Association (IBJA), confirmed that due to the increase in import duty and the onset of the Adhik Maas (extra month), investment demand has come to a complete halt, with unorganized bullion traders bearing the brunt of the loss.
Kavita Chacko, Head of Research at the World Gold Council (WGC), analyzed the situation technically, clarifying that immediately after the government announcement, there was some panic buying in large retail chain stores as consumers feared further stringent measures. However, major gold traders are currently trying to manage themselves with inventory buffers and the demand for traditional wedding jewelry; yet, the pressure to maintain sales volume and profit margins has increased excessively on small retail sellers. Similarly, Joy Alukkas, Chairman of the famous retail chain ‘Joyalukkas,’ acknowledged that his establishments have seen a slump of more than 35 percent in sales, and attributed this not only to the tax hike but also to the consumer sentiment influenced by the Prime Minister’s appeal.
If the political landscape of South India is assessed alongside this economic shift, it is clearly reflected that the Bharatiya Janata Party is emerging from its old image of being limited to the Hindi-speaking belt and is establishing itself strongly at the local level in Southern states. Karnataka, which has long been considered the gateway to the South for the BJP, has seen the party expand its base through strategic alliances with regional parties like the TDP in Andhra Pradesh and direct electoral competition in Telangana. The Lok Sabha election results are direct proof that the National Democratic Alliance (NDA) won a total of 50 seats in South India, which played a decisive role in forming the government at the Centre for the third consecutive time.
In states like Tamil Nadu and Kerala, where the BJP has always faced an extremely difficult challenge due to linguistic and regional political equations, a notable increase in the party’s vote share has been recorded. Despite not winning seats in Tamil Nadu, the NDA’s vote share increased to 11 percent. According to political analysts, the policy of including marginalized groups in the mainstream of Southern society, the effective implementation of welfare schemes, and the ‘Modi Factor’ working directly have influenced the mindset of Southern consumers.
The fact that the Prime Minister’s economic appeal is being taken so seriously even in non-BJP ruled states is a clear indicator that the ideological influence of the Central Government has now crossed geographical boundaries and has deeply penetrated the public psyche of the far South.
