New Delhi: India has sharply increased import duties on gold and silver to 15 percent from 6 percent to reduce overseas purchases of precious metals and ease pressure on the country’s foreign exchange reserves.
The revised structure includes a 10 percent basic customs duty along with a 5 percent Agriculture Infrastructure and Development Cess (AIDC), according to government notifications issued.
The decision is expected to cool demand in the world’s second-largest consumer of gold and silver while also helping narrow the trade deficit and support the rupee, which has remained under pressure in recent months.
Industry experts, however, warned that the steep increase in duties could encourage illegal imports and revive smuggling networks that had weakened after the government reduced tariffs in mid-2024.
Surendra Mehta, National Secretary of the India Bullion and Jewellers Association, said that the move was aimed at controlling the current account deficit but could impact consumer demand at a time when precious metal prices are already high.
Prime Minister Narendra Modi had recently appealed to citizens to avoid buying gold for a year to help conserve the country’s foreign exchange reserves. India depends heavily on imports to meet domestic gold demand.
Demand for gold, especially as an investment asset, has surged in recent months as investors looked for safer options amid rising prices and weak equity market returns.
According to the World Gold Council, inflows into India’s gold exchange-traded funds (ETFs) jumped 186 percent year-on-year during the March quarter, reaching a record 20 metric tons.
The government had already taken steps to curb imports by imposing a 3 percent integrated goods and services tax (IGST) on gold and silver shipments, a move that temporarily forced banks to halt imports for more than a month.
As a result, India’s gold imports in April dropped to nearly a 30-year low. Although banks later resumed imports after paying the IGST, bullion traders now expect imports to decline again following the latest increase in duties.
Bullion dealers also fear the widening price gap between domestic and international markets could fuel underground trading activities.
