MUMBAI/BENGALURU: Indian jewellery retailers and industry bodies are recalibrating their strategies as gold becomes more expensive following the government’s latest import duty hike. Companies are focusing on gold exchange schemes and lower-karat products to prevent a drop in sales volume.
On Tuesday, India raised the effective import tax on gold and silver to 15%, reversing the duty cuts announced two years ago.
The move comes as the government attempts to rein in surging precious metal imports and protect India’s foreign exchange reserves amid elevated crude oil prices and geopolitical tensions in West Asia. This week, Prime Minister Narendra Modi urged citizens to defer gold purchases for a year to help conserve foreign exchange reserves.
Retailers, meanwhile, are moving quickly to ensure customers do not walk away from jewellery purchases altogether. In its third-quarter FY26 earnings commentary, Titan Co. said more than half of its jewellery sales now come from gold exchange programmes.
Following the PM's announcement, another listed retailer, Kalyan Jewellers, launched the ‘Nation First – Gold4India Initiative,’ focusing on old-gold exchange programmes, gold monetization schemes, and related initiatives.
Retailer associations also have a few suggestions to help in the transition. Rajesh Rokde, chairman of the All India Gem & Jewellery Domestic Council (GJC), a self-regulated trade body, suggests steps like gold monetization, removal of capital gains tax on gold and goods and services tax (GST) benefits on gold exchange.
Fall in demand
Gold monetization allows individuals, trusts, and institutions to deposit idle physical gold (jewellery, coins, and bars) with banks to earn interest. Currently, capital gains on gold held for more than 12 months are taxed at 12.5%. In addition, physical gold purchases attract 3% GST on the value of the gold, while jewellery making charges are taxed separately at 5%, increasing the final purchase cost for consumers.
Stocks of Titan closed 0.8% higher on the bourses today, while those of rival Kalyan Jewellers were down 1.77%. Meanwhile, Kolkata-based Senco Gold shares were up 4.08%, and new-age jewellery retailer Bluestone closed 2.05% up. The benchmark Nifty 50 closed nearly flat. Nearly all jewellery stocks fell on Tuesday after the Prime Minister appealed to citizens to avoid gold purchases amid the West Asian war, which is weighing heavily on India's foreign exchange reserves.
Experts expect demand to fall as these measures kick in. “Jewellery business will go down by 5-7%. Total demand may go down by 10%,” said Surendra Mehta, spokesperson for jewellers' apex body, India Bullion and Jewellers Association Ltd. On Tuesday, 24-karat gold in India rose to about ₹1,53,980–1,54,090 per 10 grams. It has risen to about ₹1,65,470 today.
Retailers also acknowledge this trend. “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. Ahammad, chairman of Malabar Group. “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 revival
The government’s concern over gold imports stems from India’s dependence on overseas supply to meet domestic demand. India typically runs a current account deficit because of heavy imports of crude oil and gold. Gold imports were estimated at nearly $72 billion in FY26, accounting for 9.3% of the country’s total import bill, according to the ministry of commerce and industry.
“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,” said Manav Modi, commodities analyst, Motilal Oswal Financial Services Ltd.
Yet the higher duties could revive another longstanding challenge for policymakers: smuggling. “Illegal import is possible, which will help non-genuine businessmen,” Mehta said. Gold smuggling had fallen sharply after the July 2024 decision to reduce import duties. Government data tabled in Parliament showed that gold seizures declined to about 2,600 kg across 3,005 cases in FY25, compared with 4,971.68 kg seized in 6,599 cases in FY24.