India just made gold significantly more expensive to import. The government on Wednesday, May 13, more than doubled the import duty on gold and silver to 15%, sending shockwaves across jewellery markets, bullion dealers, and household budgets. What pushed New Delhi to take such a bold step, and what does it mean for your next jewellery purchase?
What the Government Actually Did
The Centre raised the effective import duty on gold and silver from 6% to 15% in a single move, effective May 13, 2026. The decision combines a 10% basic customs duty with a 5% Agriculture Infrastructure and Development Cess.
The government also increased the import duty on gold imported from the United Arab Emirates under the fixed quota system, which earlier enjoyed concessional duty rates. This notification, issued by the Revenue Department under the Customs Act, amends previous customs notifications issued in 2018 and 2021, and also changes the duty rates on jewellery findings such as hooks, clasps, clamps, pins, and screw backs used in jewellery making.
The higher duty will apply to imports of gold, silver, platinum, jewellery findings, and precious metal-related industrial goods.
Why India is Burning With Economic Pressure
The timing of this move is not accidental. Chief Economic Advisor V. Anantha Nageswaran, on Tuesday, said that the ongoing West Asia crisis is a “live balance of payments stress test,” with direct consequences for inflation, the current account, and the exchange rate.
The Indian rupee hit a record low of 95.63 against the US dollar on Tuesday. That single number captures the desperation behind this policy shift.
- India’s gold imports rose 24.1% year-on-year to $72 billion in FY26, while silver imports surged nearly 150% to $12.1 billion.
- India’s foreign exchange reserves as of May 1 were $690.69 billion, down $7.79 billion, or about 1.12%, from the end of March, according to the Reserve Bank of India.
- RBI data shows the current account deficit widened to $13.2 billion, or 1.3% of GDP, in the October to December quarter of 2025-26, alongside a wider merchandise trade deficit.
- Global crude prices surged from around $70 per barrel to nearly $126 per barrel following the Middle East conflict and tensions around the Strait of Hormuz, ballooning India’s import bill.
The country spent nearly a tenth of its total foreign exchange reserves on gold and silver last year, and the import bill is expected to rise further in 2026 as prices of both metals continue to surge. Gold sits right behind crude oil as India’s biggest dollar drain.
Modi’s Personal Appeal and the Policy That Followed
On May 10, 2026, during a public address in Hyderabad, Prime Minister Narendra Modi issued a striking appeal to the nation, framing the request as a “national responsibility” amid global economic turbulence and a West Asia crisis that has sent oil prices soaring.
He asked Indians to stop buying gold for one year, a deeply personal ask in a country where gold is woven into everything from weddings to inheritance. For a country where a wedding is effectively incomplete without the glint of gold jewellery, this “resolution of restraint” challenges one of India’s deepest cultural pillars.
Modi also asked Indians to avoid buying gold and to cut nonessential overseas travel for at least a year. He explained his justification: “In the current situation, we must place great emphasis on saving foreign exchange.”
The appeal landed. Within days, the government backed words with action. According to a Moneycontrol analysis, even a 10% reduction in gold consumption could save India around $7.2 billion in foreign exchange. The duty hike is now the government’s harder push to make that happen.
What This Means for Gold Prices and Your Wallet
The government’s decision to raise the effective import duty on gold and silver to 15% from 6% is expected to push domestic bullion prices higher and weigh on sentiment for jewellery stocks in the near term. India imports most of its gold requirement, and a higher import tax directly increases the landed cost of the precious metal. As a result, domestic gold prices could rise further even if international bullion prices remain stable.
The move may also lead to higher domestic premiums and softer jewellery demand, especially as gold prices are already trading at elevated levels.
| Factor | Before (6% Duty) | After (15% Duty) |
|---|---|---|
| Basic Customs Duty | 5% | 10% |
| Agriculture Cess (AIDC) | 1% | 5% |
| Total Effective Duty | 6% | 15% |
| Expected Domestic Price Impact | Lower | Rise of 5-10% minimum |
| UAE Concessional Quota | Available | Revised upward |
Gold prices in the international market have risen 98% since the beginning of 2025. While that has hit jewellery buying, overall demand has not slumped because investment demand has risen, with Indians increasingly buying coins and bars in the physical market while a growing number of investors are turning to exchange-traded funds.
Industry Warning: The Grey Market Could Come Roaring Back
The industry’s reaction was immediate and deeply divided. Surendra Mehta, national secretary at the India Bullion and Jewellers Association, acknowledged the government’s intent while flagging the consequences, saying, “As expected, the government has raised duties to curb the current account deficit. However, this could affect demand, as gold and silver prices were already elevated.”
The bigger worry is smuggling. Industry officials and bullion market participants have warned that a tariff rate as high as 15%, applied to metal already trading at elevated prices, creates strong financial incentives for illegal imports. Smuggling had declined materially after India reduced duties in mid-2024, but dealers say grey market networks are likely to reactivate quickly under the new regime.
Before import duties were reduced to 6%, nearly 100 to 120 tonnes of gold reportedly entered India annually through grey-market channels. That number could climb again.
India has historically struggled to suppress unofficial gold flows when official import costs rise sharply, and any revival of the grey market would undermine both the trade data and the policy’s intended fiscal benefits.
The government in the 2024-25 budget had cut customs duty on gold to 6% to boost the domestic gems and jewellery industry, curb illegal smuggling, and bring down local prices. Wednesday’s sharp reversal is a full U-turn from that logic, driven purely by economic necessity.
This is not India’s first time using this tool. India had, in 2022, raised gold import tax to 15% to check the current account deficit amid a falling rupee during the Russia-Ukraine war. The playbook is familiar. The outcome, however, is never guaranteed.
India finds itself caught in an impossible balancing act. Raising duties slows legitimate imports but risks pushing gold underground. Keeping duties low bleeds the rupee and the forex reserves. Indian households collectively hold more than 30,000 tonnes of gold, much of it lying idle in lockers, vaults, and homes, and until that wealth is channelled productively through monetisation schemes, the government will keep reaching for the same blunt instrument. The question every Indian family is now asking is simple: how much more will gold cost by the next wedding season, and is the government’s bet on national economic discipline going to pay off?
What do you think about this sharp hike in gold and silver import duty? Will it really help save India’s forex reserves, or will it push more buyers into the grey market? Share your views in the comments below.
