In a move to stabilize the economy amid rising global tensions, the Indian government has significantly increased import duties on gold and silver. The decision, effective May 13, raises the duty on precious metals to 15 percent, a notable increase from the previous 6 percent. This measure aims to curb the inflow of gold and silver, addressing concerns about the country’s rising import bill, especially in light of the ongoing crisis in West Asia.
The Finance Ministry’s notification detailed the increase, which includes adjustments to the social welfare surcharge (SWS) and the agriculture infrastructure and development cess (AIDC). This decision follows Prime Minister Narendra Modi’s call for reduced gold purchases and other austerity measures designed to conserve foreign exchange reserves. The increased duties are projected to impact both domestic prices and the broader economic landscape, affecting consumers, jewelers, and the financial sector alike.
Information reaching TahirRihat.com suggests that, this adjustment responds to a substantial surge in India‘s gold imports, which climbed over 24 percent to reach an unprecedented $71.98 billion in the fiscal year 2025-26. Despite the increase in value, the physical volume of gold shipments saw a slight dip of 4.76 percent, totaling 721.03 tonnes in the same period. The price of gold has seen a significant rise from USD 76,617.48 per kilogram in FY25 to USD 99,825.38 per kilogram in FY26.
The immediate impact of the duty hike was evident in the domestic market. In the national capital, gold prices surged by Rs 1,500, nearly one percent, reaching Rs 1,56,800 per 10 grams on Tuesday, up from Monday’s closing of Rs 1,55,300. Silver prices also saw a substantial increase, climbing by Rs 12,000, or 4.53 percent, to Rs 2,77,000 per kilogram. These price fluctuations reflect the market’s immediate response to the government’s policy change.
Globally, spot gold experienced a decline of USD 42.33, or one percent, settling at USD 4,692.64 per ounce, while silver prices fell by 3.04 percent to USD 83.49 per ounce. These international movements provide context for India’s domestic policy shift, highlighting the interconnectedness of global precious metal markets.
The government’s decision to raise import duties reverses a previous policy from the 2024-25 budget, which had reduced customs duty on gold to 6 percent. The rationale behind the earlier reduction was to stimulate the domestic gems and jewelry industry, curb illegal smuggling, and lower local prices. The current increase indicates a shift in priorities, driven by concerns over the balance of payments and the need to conserve foreign exchange.
India’s history with gold import taxes includes a similar measure in 2022, when the government raised the tax to 15 percent to address the capital account deficit (CAD) amid a weakening rupee due to the Russia-Ukraine war. As the world’s second-largest gold consumer after China, India’s policies on gold imports carry significant weight in the global market.
The jewelry industry is a major driver of gold imports within the country. Chief Economic Advisor V Anantha Nageswaran remarked that the ongoing West Asia crisis presents a “live balance of payments stress test,” with direct implications for inflation, the current account, and the exchange rate. The balance of payments reflects the difference between inflows and outflows of foreign exchange in a country over a specific period.
The Indian rupee recently hit a record low of 95.63 against the US dollar, underscoring the economic pressures facing the nation. Prime Minister Modi has urged citizens to use fuel judiciously, postpone gold purchases, and defer foreign travel to conserve foreign exchange amid the West Asia crisis. He also suggested reducing petrol and diesel consumption, utilizing metro rail services, carpooling, increasing the use of electric vehicles (EVs), using railway services for parcel movement, and working from home.
India is currently grappling with high import bills for oil and fertilizers because of the US-Iran conflict, which has been ongoing for ten weeks. This conflict has led to the closure of the Strait of Hormuz, a critical route through which India imports 60 percent of its LPG, with 90 percent of that volume passing through the now-blocked strait.
The recent adjustments in import duties on gold and silver reflect the government’s multi-faceted approach to navigate economic challenges posed by both regional and global circumstances. These measures will likely continue to be closely monitored for their impact on various sectors of the Indian economy.
Tahir Rihat (also known as Tahir Bilal) is an independent journalist, activist, and digital media professional from the Chenab Valley of Jammu and Kashmir, India. He is best known for his work as the Online Editor at The Chenab Times.
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