The centre has raised import duties on gold and silver to 15% from 6%, as per government announcements, as part of a strategy to limit foreign purchases and relieve pressure on foreign exchange reserves.
This increase—comprising a 10% basic customs duty and a 5% Agricultural Infrastructure and Development Cess (AIDC)—is likely to dampen demand in the second-largest market for precious metals globally. Simultaneously, it could help reduce the trade deficit and support the rupee, one of Asia’s weaker currencies.
Nevertheless, industry experts warn that elevated duties might lead to a rise in smuggling, a trend that had diminished following tariff reductions in mid-2024, according to reports.
On Sunday, Prime Minister Narendra Modi encouraged citizens to refrain from buying gold for a year in order to safeguard foreign exchange reserves. India relies largely on imports to fulfil its gold consumption needs.
In India, the demand for gold, especially for investment, has increased following a recent surge in prices and disappointing returns from equities over the past year.
According to the World Gold Council, inflows into India’s gold exchange-traded funds (ETFs) rose 186% year-on-year in the March quarter, totalling a historic 20 metric tons.
