The Indian government has raised import duties on gold and silver from 6 percent to 15 percent, and on platinum imports from 6.4 percent to 15.4 percent, a decision aimed at curbing rising foreign exchange outflows and addressing pressure on the current account balance. This move comes amid a surge in gold and silver imports during the fiscal year 2025-26 (FY26), prior to the escalation of the conflict in Iran in late February, which has further weakened the rupee by nearly 5 percent.

Gold prices have climbed approximately 30 percent over the past year, currently holding steady around $4,700 per troy ounce. With import values reaching $83 billion in FY26, gold and silver together accounted for more than 10 percent of India’s total imports. This has prompted calls for a reduction in import volumes to counter the combined effects of elevated prices and a depreciating currency. The Prime Minister has also urged households to delay gold purchases, reinforcing efforts to restrain consumption.

Gold is predominantly seen as a non-essential import in India, with industrial demand constituting only about 13 percent of total consumption. As such, reducing gold imports is unlikely to significantly affect broader economic activity. Data shows gold import volumes declined from 879 tonnes in FY22 to 721 tonnes in FY26; however, the value of imports escalated due to the higher gold prices. In FY26, gold imports totaled $72 billion, marking a 24 percent increase over the previous fiscal year, while silver imports soared to $12 billion, surging 150 percent from FY25 levels.

The surge in gold prices has also driven increased investment demand, reflected in higher purchases of gold exchange-traded funds (ETFs) as well as physical gold in the form of bars and coins. The newly increased import duties are expected to dampen both retail and investment demand.

In an effort to close a previous loophole, the government has also raised the concessional duty on gold imported under the India-UAE Comprehensive Economic Partnership Agreement from 5 percent to 14 percent, aligning it more closely with the general import rate and curtailing arbitrage opportunities.

Historical trends indicate that prior duty hikes in 2013, 2019, and 2022 led to significant declines in the value of gold imports in the months that followed. If a similar pattern emerges, the recent duty increase could reduce the import bill by an estimated $6 billion to $9 billion.

The government faces ongoing pressure on the balance of payments due to persistent foreign portfolio outflows, rising oil import costs, declining remittance inflows, and export challenges linked to the geopolitical situation. Consequently, mitigating gold and silver import expenditure has become a key policy tool.

However, the sharp increase in gold import duties raises concerns about potential smuggling, as the growing price gap between domestic and international markets could incentivize illicit trade. To counter this risk, enhanced enforcement and monitoring will be essential. Additionally, the government may consider implementing or refining gold monetisation schemes aimed at encouraging the recycling of idle domestic gold reserves, thereby reducing reliance on fresh imports.