The Indian government has increased import duties on gold and silver to 15% from 6%, in a move aimed at reducing overseas purchases and easing pressure on foreign exchange reserves. The revised structure includes a 10% basic customs duty and a 5% Agricultural Infrastructure and Development Cess (AIDC), significantly raising the cost of importing precious metals into the country.India, the world’s second-largest consumer of gold, relies heavily on imports to meet domestic demand. In FY 2025–26, gold imports rose 24% to a record $71.98 billion, contributing to higher dollar outflows and putting pressure on the rupee. The duty hike is expected to dampen demand and help narrow the trade deficit, while offering some support to the currency. The move also follows Prime Minister Narendra Modi’s recent appeal urging citizens to limit gold purchases temporarily to conserve foreign exchange. However, industry experts caution that higher duties could revive smuggling, a trend that had declined after tariff reductions in 2024.
In the domestic market, bullion prices saw volatility following the announcement. Gold briefly crossed ₹1.56 lakh per 10 grams on MCX, while silver traded near ₹2.77 lakh per kg. Demand trends were already showing signs of moderation. Jewellery demand has softened, with volumes down nearly 20% year-on-year, though higher prices mean the value of sales remains strong, while recycling of old gold now accounts for a significant portion of supply. At the same time, investment demand remains strong, with the World Gold Council reporting a 186% surge in gold ETF inflows during the March quarter. The government’s broader strategy focuses on reducing reliance on imports and encouraging the use of existing gold holdings. India is estimated to hold around 20,000 tonnes of gold in households, much of which remains idle. While the duty hike may cool demand in the short term, its larger objective is to strengthen external balances and improve long-term economic stability.
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