India has more than doubled the import duty on gold and silver, raising it to 15% from 6% in a move designed to reduce the country's dependence on overseas metal purchases and ease pressure on its foreign exchange reserves. The decision, announced through government orders on Wednesday, combines a 10% basic customs duty with a 5% Agriculture Infrastructure and Development Cess.

The hike follows Prime Minister Narendra Modi's appeal on Sunday, urging Indians to avoid buying gold for a year, a rare public call that emphasised just how seriously the government is treating the pressure on reserves. India meets almost all of its gold consumption through imports, making the metal a significant contributor to the trade deficit.

Industry reaction: Demand hit, smuggling risk rises

The response from the trade was immediate and split. Surendra Mehta, national secretary at the India Bullion and Jewellers Association, acknowledged the government's intent while flagging the consequences. "As expected, the government has raised duties to curb the current account deficit. However, this could affect demand, as gold and silver prices were already elevated," he said.

The smuggling concern is more pointed. A Mumbai-based bullion dealer at a private bank, who declined to be named, warned that grey markets would likely reactivate given the profit potential at current price levels. "Grey markets are likely to become active, as the incentives to bring in gold illegally are high. At current price levels, smugglers could make significant profits," he said.

It is a familiar pattern. Smuggling had eased significantly after India cut gold tariffs in mid-2024, Wednesday's sharp reversal risks undoing that progress.

The context: Record ETF inflows, near 30-year import low

The duty hike arrives at a complicated moment for India's gold market. Demand for gold as an investment has surged over the past year, driven by a sustained price rally and negative returns from equities. Inflows into India's gold exchange-traded funds jumped 186% year-on-year in the March quarter to a record 20 metric tons, according to the World Gold Council.

At the same time, the government had already been tightening the screws on imports before Wednesday's announcement. A 3% integrated goods and services tax levied on gold and silver imports prompted banks to pause purchases for over a month, pushing April imports to a near 30-year low. Banks have since resumed buying after absorbing the IGST charge, but bullion dealers said imports are now likely to fall sharply again following the latest duty increase.

(With inputs from Reuters)

Published on: May 13, 2026 7:34 AM IST