In a significant move to curb rising gold imports and ease pressure on foreign exchange reserves, the Indian government has increased import duties on gold and silver to 15% from the previous 6%. The decision comes amid escalating geopolitical tensions in West Asia and a growing import bill.
Reason for Duty Hike
The government raised the import duties to reduce inbound shipments of gold and silver, thereby saving foreign exchange. The West Asia crisis and rising import bills have prompted this measure. Gold imports surged 24% to $71.98 billion in the fiscal year 2025-26, contributing to a trade deficit of $333.2 billion.
Impact on Prices
The duty hike is expected to increase the retail price of gold jewellery and coins, making them more expensive for consumers. This could dampen demand in the short term.
Industry Concerns
The gems and jewellery industry has expressed concerns that the duty hike could spur smuggling and create a grey market. Industry bodies fear that higher taxes will make legitimate business more challenging, potentially driving transactions underground.
Government's Objective
The primary objective of the move is to curb gold imports, which have been rising rapidly. In 2025-26, India imported 721.03 tonnes of gold, accounting for over 9% of total imports. By raising duties, the government aims to reduce pressure on the trade deficit and current account deficit.
Historical Context
This is the second time in recent years that the government has raised gold import taxes to 15%. Previously, in 2022, a similar hike was implemented to address the current account deficit. The move underscores the government's commitment to managing forex outflows.
Key Statistics
- Gold import value in 2025-26: $71.98 billion
- Gold import volume in 2025-26: 721.03 tonnes
- Trade deficit in 2025-26: $333.2 billion
- Gold's share of total imports: Over 9%
The duty hike is expected to have a mixed impact, curbing imports while raising concerns about smuggling. The government will monitor the situation closely.
