India hikes gold duty to 15% from 6% amid rising forex stress and trade deficit fears – Firstpost

India on Wednesday sharply raised import duties on gold and silver to 15 per cent from 6 per cent, as the government intensified efforts to curb soaring bullion imports, protect foreign exchange reserves and ease mounting pressure on the rupee and trade deficit.

The Finance Ministry said the revised duty structure would come into effect immediately from May 13, with the higher levy applying to gold, silver, platinum, jewellery findings and several precious metal-linked industrial imports.

Under the new structure, the government has imposed a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess (AIDC), taking the effective import tax on gold and silver imports to 15 per cent.

The move comes amid growing concerns within the government over India’s swelling import bill, widening current account deficit (CAD) and rising external sector vulnerabilities as geopolitical tensions in West Asia keep commodity prices elevated.

The decision also follows Prime Minister Narendra Modi’s appeal on Sunday
urging citizens to avoid buying gold for a year, use fuel judiciously and cut unnecessary spending to help protect India’s foreign exchange reserves during a period of global uncertainty.

India imports nearly all the gold it consumes, making bullion purchases a significant drain on foreign exchange reserves whenever domestic demand surges.

The country’s gold imports rose more than 24 per cent to a record $71.98 billion in 2025-26, compared with $58 billion in the previous fiscal year, according to commerce ministry data. Imports stood at $45.54 billion in 2023-24 and around $35 billion in 2022-23.

Although import volumes declined 4.76 per cent to 721.03 tonnes in 2025-26 from 757.09 tonnes a year earlier, the sharp increase in international gold prices sharply inflated India’s overall import bill.

Gold prices climbed from $76,617.48 per kilogram in FY25 to $99,825.38 per kilogram in FY26. In Delhi’s retail market, prices are now hovering around Rs 1.5 lakh per 10 grams after breaching the Rs 1 lakh mark for the first time last year.

Analysts said the surge in bullion imports has emerged as a key concern for policymakers because it directly affects India’s trade deficit and puts additional pressure on the rupee, which has remained among Asia’s weakest-performing currencies this year.

India’s merchandise trade deficit widened to $333.2 billion during 2025-26, while gold alone accounted for more than 9 per cent of the country’s total imports worth $775 billion.

The Reserve Bank of India had earlier warned of rising pressure on the current account deficit. RBI data released in March showed India’s CAD widened to $13.2 billion, or 1.3 per cent of GDP, in the December quarter, compared with $11.3 billion a year earlier, largely due to a higher trade deficit.

Government officials believe reducing bullion imports could help stabilise the rupee and preserve foreign exchange reserves at a time when India is also dealing with volatile crude oil prices and persistent global financial uncertainty.

India has already taken multiple steps in recent weeks to slow bullion inflows. Authorities earlier imposed a 3 per cent integrated goods and services tax (IGST) on gold and silver imports, prompting banks to temporarily suspend imports for more than a month.

As a result, April gold imports plunged to near 30-year lows. Although banks later resumed imports after paying the IGST, bullion dealers now expect another sharp decline in imports following the latest tariff hike.

Demand for gold in India has surged over the past year, particularly from investors seeking safe-haven assets amid volatile equity markets and geopolitical tensions.

According to the World Gold Council, inflows into India’s gold exchange-traded funds (ETFs) jumped 186 per cent year-on-year in the March quarter to a record 20 metric tonnes.

The Finance Ministry notification also revised customs duty rates on jewellery “findings” — components such as clasps, hooks and pins used in jewellery manufacturing. Gold and silver findings will now attract 5 per cent customs duty, while platinum findings will face a 5.4 per cent levy.

The government has additionally modified concessional duty provisions for imports of spent catalysts or ash containing precious metals used for recovery and recycling. Such imports will now attract a concessional customs duty of 4.35 per cent subject to compliance conditions.

India has also tightened concessional duty provisions for gold imports from the United Arab Emirates under the fixed-quantity quota system that earlier enjoyed lower tariff rates.

Switzerland remains India’s biggest source of gold imports with nearly a 40 per cent share, followed by the United Arab Emirates at over 16 per cent and South Africa at around 10 per cent.

With inputs from agencies.