India's gold demand is projected to decline by 50-60 tonnes in calendar year 2026, or about 10% lower than the previous year, following the recent increase in import duty, according to the World Gold Council (WGC), as reported by PTI. In its India gold market update, the WGC stated: "Looking at 2026 as a whole, we estimate that combined jewellery and bar and coin demand could decline by around 50-60 tonnes, around 10% lower than the previous year, due to the impact of the import duty hike."
Import Duty Hike Details
The gold import duty was increased sharply from 6% to 15%, marking the largest increase on record and fully reversing the reduction announced in July 2024. Prime Minister Narendra Modi has also appealed to consumers to avoid buying gold for a year. The WGC noted that annual demand would also be influenced by factors including gold prices, income levels, inflation, and monsoon conditions.
Impact on Jewellery vs. Investment Demand
According to the council, "Our econometric models suggest that changes in import duties tend to impact gold demand in both the short and long term, although the impact differs across jewellery and investment products such as bars and coins. Investment demand appears more sensitive to duty changes, while jewellery demand has shown greater resilience." Jewellery consumption is influenced more by prices and inflation and is less affected by import duty changes, partly because purchases are often linked to weddings and social occasions. Investment demand, however, tends to respond more sharply to income levels, duties, and restrictions, while inflation and rainfall patterns can also influence buying trends in the short term.
Historical Link to Smuggling
The WGC also pointed to a historical link between higher import duties and unofficial gold inflows. It said duty increases between 2013 and 2026 were generally followed by higher levels of smuggled gold, while duty reductions coincided with sharp declines in such inflows. Following the 4% duty increase in 2013, unofficial imports rose sharply from around 10 tonnes in the first quarter of that year to 70 tonnes by the same period in 2014, a seven-fold increase in less than a year. The council noted that unofficial inflows remained elevated even when duties stayed unchanged, suggesting smuggling networks, once established, are difficult to dismantle. A similar trend was observed after import duty was increased from 10.75% to 15% in July 2022. However, after the duty was cut to 6% in July 2024, unofficial imports dropped almost immediately to near-zero levels, the WGC added.
