The Indian government has increased import duties on gold and silver from 6 per cent to 15 per cent to curb inbound shipments of precious metals amid a rising import bill due to the West Asia crisis.
The gems and jewellery industry anticipates challenging times following the government's decision to increase gold import duty to 15 per cent, a move that exporters warn could fuel the grey market and heighten smuggling risks.
Monthly gold imports have declined to 25-30 tonnes from 70-80 tonnes while recycling of old jewellery has increased following the recent hike in import duties.
India has capped gold imports under the Advance Authorisation scheme at 100 kg, a day after significantly increasing import duties on precious metals. This move aims to tighten conditions for duty-free gold imports by jewellery exporters and curb non-essential imports amidst a ballooning import bill.
Despite a sharp increase in import duties on gold and silver to 15 per cent, the precious metals are trading at significant discounts in the domestic market, with gold seeing discounts of up to $200 an ounce and silver up to $6 an ounce.
Revenue intelligence and customs officers are set to intensify surveillance and increase vigilance on international borders to combat potential gold smuggling following a significant increase in customs duty on gold.
India's gold and silver imports from its free trade agreement (FTA) partner UAE have skyrocketed 210 per cent to $10.7 billion in 2023-24 and there is a need to potentially revise the concessional customs duty rates under the pact to mitigate the arbitrage driving this surge, a report said on Monday. Economic think tank Global Trade Research Initiative (GTRI) said this sharp rise in gold and silver imports is primarily driven by import duty concessions granted by India to the UAE under the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
The Indian government has imposed import restrictions on all forms of gold, silver, and platinum articles to prevent misuse of free trade agreements (FTAs). The restrictions apply immediately, regardless of prior contracts or commitments.
Industry representatives say the government may be tempted to raise the duty on gold and silver by Rs 100 per 10 gram and Rs 500 per kg, respectively, to earn extra revenue at a time the economy is facing several challenges.
'If the war continue for a longer period of time, it is just a matter of time before the government will pass on some of the price increases.'
The Indian central government has reduced its total expenditure by approximately 60,000 crore in FY26, below its revised estimate, to successfully achieve the fiscal deficit target of 4.4 per cent of gross domestic product (GDP), according to the latest data from the Controller General of Accounts (CGA).
India has protected the interest of domestic farmers and MSMEs by not extending any duty concessions on products across several sectors, including agricultural items such as dairy, as well as chocolates, gold, silver, jewellery, footwear, and sports goods, under the trade pact with Oman.
Following through announcements with enforcement of measures is key, as a run through recent Indian economic history shows, points out A K Bhattacharya.
The Indian rupee plummeted to a new all-time closing low of 95.81 against the US dollar, driven by surging crude oil prices, persistent inflation concerns, and a strengthening dollar index.
The steep cut in Customs duty on silver in the FY25 Budget to 6 per cent from 15 per cent may provide the government temporary relief by checking the spurt in silver imports from the United Arab Emirates (UAE) under the Comprehensive Economic Partnership Agreement (CEPA). In FY24, silver imports from the UAE jumped to $1.7 billion from only $11.18 million in FY23, according to commerce department data. In May, about 87 per cent of India's silver imports came from Dubai.
The Reserve Bank too imposed a series of curbs to restrict gold imports.
India's rapidly ageing truck fleet, with 42% of vehicles over 12 years old, is set to trigger a replacement-driven growth of 3-5% annually over the next five years.
'The situation globally is quite challenging, but we have the confidence and courage of conviction that we will come out winners even in this challenging time.'
After recording significant decline in September, gold and silver imports jumped by 62.5 per cent to $1.3 billion in October this year.
Gems and Jewellery Export Promotion Council (GJEPC) has urged the government to reduce import duty on gold to 4 per cent from 7.5 per cent and a special package for the sector in the forthcoming Budget to boost shipments. As part of its pre-Budget recommendations, the council has also suggested a reduction in the import duty on cut and polished diamonds; cut and polished precious and semi-precious gemstones from 7.5 per cent to 2.5 per cent. "If (gold) imported at 4 per cent duty rate....working capital amounting to Rs 225 crore would be blocked instead of Rs 500 crore," the council said in a statement.
The Indian rupee plummeted to an all-time low of 95.80 against the US dollar, settling at 95.66, driven by elevated crude oil prices and escalating geopolitical tensions in West Asia, despite potential RBI intervention and import curbs on gold.
The new baggage rules, 2026, come into effect from midnight on February 2 and replace a decade-old baggage rule.
Gold and silver imports declined 80.55 per cent to $1.05 billion in November after a slew of measures taken by the government to curb inbound shipments of the metal, aimed at narrowing the current account deficit.
'For most investors, I recommend a low double-digit allocation (10 to 12 per cent) to gold and silver combined.'
India Ratings and Research predicts the Reserve Bank of India (RBI) will maintain the repo rate at 5.25 per cent throughout FY27, despite potential inflationary pressures from higher fuel prices, with inflation expected to remain within the central bank's tolerance band.
These imports grew 89 per cent to $8.39 billion in May.
India will also launch a sovereign gold bond to lower physical demand.
Champagne consumption in India is expanding beyond major metropolitan areas into smaller cities like Kanpur, Guwahati, and Lucknow, driven by a desire for sophisticated lifestyle declarations and a growing appreciation for the beverage.
In August 2013, import duties on gold, silver and platinum were hiked to 10 per cent in order to curb the surging imports and also to check CAD.
The conflict may disrupt Budget 2026-2027 projections, squeezing revenues and raising subsidies, prompting fiscal adjustments and potential reforms, echoing lessons from the Covid-era shock, points out A K Bhattacharya.
India's current account deficit, which is the excess of foreign exchange outflows over inflows, touched a historic high of 4.8 per cent of GDP in 2012-13, mainly due to rising imports of gold and petroleum products.
New investors should avoid short-term, tactical entries and instead go for staggered buying via ETFs to manage volatility.
People across Kashmir have donated generously to Iran, which has been ravaged by war. Donations included cash, gold, silverware, and copper utensils. A woman even donated gold kept as a memento of her husband, who died 28 years ago. The Iranian Embassy in New Delhi has expressed its gratitude for the support.
For last fortnight, the tariff value of gold was fixed at $382 per 10 grams and silver at $516 per kg.
Exporters of gems and jewellery have said the free-trade agreement (FTA) has brought relief to their sector because this opens up the world's second-largest market and brings them on a par with China and Thailand, which face zero tariffs on shipments to Europe.
The Commerce and Industry Ministry is pitching for easing of the gold import restrictions to boost gems and jewellery exports
Households should moderate large discretionary expenses for the time being.
'They should prioritise essential spending. They should maintain an emergency fund covering 6 to 12 months of expenses.'
Imports of gold and silver in February 2013 stood at $5.24 billion. In January this year, they were $1.72 billion.
India's gems & jewellery exports witnessed 30.6 per cent year-on-year (Y-o-Y) contraction in October to $2.17 million, amid the imposition of a steep 50 per cent tariff by the United States (US) on several Indian products.
