Days after Prime Minister Narendra Modi made a clarion call for austerity, the Centre sharply raised import duty on precious metals to save dollars, at a time when the Gulf crisis boosts energy prices, weakens the rupee, and eats into the nation's current account. While economists said the decision could dampen demand and arrest the rupee's fall, others said it may fuel smuggling and impact jobs in the jewellery sector.
The finance ministry increased the total import duty on gold, silver and platinum from 9.18% to 18.45%. The new rate includes 10% basic customs duty, 5% agriculture cess and 3.45% Integrated GST, up from 5%, 1% and 3.18% before. The move signals an effort to conserve forex as costly oil and shipping disruptions threaten to widen India’s import bill and worsen the current account deficit (CAD).
“Precious metals, while culturally and financially important, are largely consumption-and investment-driven imports involving significant foreign exchange outflows,” a finance ministry official said, adding this is a calibrated intervention rather than an anti-consumer measure. The goal is to save forex for essential imports such as crude oil, fertilizers, industrial raw materials, defence equipment, capital goods and critical technologies.
Wednesday's move reverses the steep tariff cuts announced in the 2024 budget, when duties on gold and silver were reduced from 15% to 6%, and on platinum from 15.4% to 6.4%. It resulted in a drop in gold smuggling cases by about 50% in FY25 compared to the previous year, with seizures falling to 2,600 kg from nearly 5,000 kg in FY24.
Stock reaction
In a market that closed more or less unchanged, jewellery stocks traded mixed; shares of Titan Co. Ltd, Senco Gold and Bluestone rose 0.8%, 4.08% and 2.05%, while Kalyan Jewellers fell 1.77%. Nearly all jewellery stocks had fallen on Tuesday after the Prime Minister's appeal to citizens to avoid gold purchases. At the same time, gold loan financiers are eyeing increased business; Manappuram Finance shares rose 5.63% higher, Muthoot Finance 4.65% and IIFL Finance 4.31%.
The rally in gold financiers was driven by the price rise after the duty hike, said Ajit Mishra, senior vice-president of research at Religare Broking. "Higher gold prices increase the value of collateral pledged with gold loan NBFCs, improving loan-to-value dynamics and expanding their lending capacity. The market is also factoring in stronger demand for gold-backed loans from households and MSMEs amid tighter liquidity conditions," Mishra said.
Kalyan and Titan are doubling down on gold exchange schemes and lower carat products to ensure sales volume does not drop.
“From an industry perspective, there may be near-term moderation in discretionary purchases or a shift towards lighter, more exchange-driven purchases,” said M.P. Ahammed, chairman of Malabar Group, a jewellery retailer. “The duty revision may lift retail jewellery prices in the near term, and customers, particularly first-time and investment-led buyers, will take a moment to recalibrate".
Smuggling fears
Gem and Jewellery Export Promotion Council (GJEPC) chairman Kirit Bhansali warned that steep duties could revive smuggling. “The duty was earlier reduced to curb smuggling. With the higher duty now, all security agencies will have to remain alert as such activities may increase,” he said.
Emkay Global Financial Services Ltd chief economist Madhavi Arora said the move could provide some support to the rupee by moderating gold imports. “The duty hike on bullion imports is not surprising given the external pressures India is facing due to the Middle East energy crisis. It is similar to past policy measures where duty hikes led to a material dent in gold import volumes,” Arora said. “However, we believe that if the energy crisis persists, there could be further curbs on non-essential imported items. At the margin, yes, it helps the rupee, as gold now accounts for more than 9% of India’s total import bill compared with just 5-6% a few years ago,” she said.
In FY26, India imported nearly $72 billion worth of gold, about 25% higher than the previous year, while silver imports crossed $12 billion, recording a nearly 150% annual increase. Gold is imported under different categories. One category covers export-oriented imports under concessional schemes, while the other includes imports by banks, bullion dealers, refiners, trading houses and authorized importers supplying the domestic market.
Rahul Ahluwalia, founding director at Foundation for Economic Development, cautioned that the attempt could have unintended consequences.
“Trying to micromanage consumer and industry behaviour via trade policy has substantial trade-offs that we have to be careful about. It can create more problems than it solves. In this case, it may negatively affect employment and exports in the jewellery sector and the ability of Indians to invest in one of the best-performing asset classes at a time of global uncertainty,” he said. Ahluwalia suggested that allowing the rupee to depreciate naturally and letting oil prices reflect market realities would be a more efficient way to reduce imports.
'Impact on business'
The hike could impact business, warned Surendra Mehta, secretary of India Bullion and Jewellers Association Ltd. “If there is a decline of up to 10% in business, it will have repercussions on the employability of the workforce engaged in the sector,” he said, adding that rising inflation and higher gold prices may also lead to increased dependence on gold loans.
“Since India relies heavily on imports to meet domestic gold demand, higher duties are expected to help narrow the trade deficit and provide support to the rupee which was trading at all-time high levels,” said Manav Modi, commodities analyst at Motilal Oswal Financial Services Ltd.
An industry representative said job losses may not be as high as feared.
“The concern over employment losses may be overstated as many artisans can shift towards other segments such as imitation jewellery and related craft work,” said Vinod Kumar, president, India SME Forum. Indian homes and temples are estimated to have 25,000-35,000 tonnes of gold. “If this gold is brought into the market, it can help reduce dependence on imports,” he said.
Queries emailed on Wednesday to the ministries of finance and consumer affairs were not immediately answered.
According to Gem and Jewellery Export Promotion Council, India's overall gems and jewellery exports fell 3.32% year-on-year to $27.72 billion in FY26, while imports rose 16.99% to $22.83 billion.
India remains heavily dependent on imports to meet domestic demand. According to the latest World Gold Council data, India’s gold imports averaged 83 tonnes per month during the first two months of 2026, sharply higher than the 2025 monthly average of 53 tonnes, driven largely by strong investment demand and ETF inflows. Total gold imports in the January-March quarter rose 58% year-on-year to 186 tonnes.