In a significant policy move aimed at controlling non-essential imports and protecting the country’s foreign exchange reserves, the Government of India has increased the import duty on gold and silver to 15 percent. The decision comes at a time when the country is facing mounting economic pressure due to the ongoing geopolitical tensions in West Asia and a rapidly rising import bill.
The Finance Ministry issued a notification announcing the revised duty structure, which came into effect on May 13. The increase has been implemented through adjustments in the Social Welfare Surcharge (SWS) and the Agriculture Infrastructure and Development Cess (AIDC), pushing the overall customs duty on precious metals significantly higher than before. The government believes that the move will discourage excessive imports of gold and silver, which are largely considered non-essential commodities but contribute heavily to India’s import expenditure.
The decision follows recent remarks by Prime Minister Narendra Modi, who had urged citizens to adopt a more cautious approach toward spending foreign exchange. Speaking at a public rally in Hyderabad, the Prime Minister suggested that people should postpone gold purchases and reduce unnecessary foreign travel in order to help the country conserve valuable foreign currency during the ongoing crisis in West Asia.
India’s appetite for gold has long been one of the highest in the world, driven by cultural traditions, weddings, festivals, and the jewellery industry. According to official data, the country’s gold imports surged more than 24 percent during the financial year 2025–26, reaching an all-time high of USD 71.98 billion. Interestingly, while the value of imports rose sharply, the physical quantity of gold imported actually declined slightly by 4.76 percent, totaling 721.03 tonnes during the same period. The sharp increase in value is largely attributed to the steep rise in global gold prices.
Internationally, gold prices have witnessed a dramatic surge. The price of gold increased from about USD 76,617 per kilogram in FY25 to nearly USD 99,825 per kilogram in FY26, reflecting strong global demand and growing investor interest in safe-haven assets during geopolitical uncertainties.
Domestic markets have also responded quickly to the developments. In the national capital New Delhi, gold prices rose by ₹1,500 to reach ₹1,56,800 per 10 grams, compared to the previous closing level of ₹1,55,300. Silver prices witnessed an even sharper rise, jumping ₹12,000 to touch ₹2,77,000 per kilogram. Traders say that the increase in import duty could tighten supply in the domestic market and push prices higher in the near term.
However, global markets showed a slightly different trend. Spot gold prices slipped by around 1 percent, while silver prices dropped by more than 3 percent in international trading. Analysts believe that domestic price movements in India may continue to diverge from global trends due to tax changes and currency fluctuations.
The duty hike marks a sharp shift from the government’s earlier strategy. In the Union Budget 2024–25, import duty on gold had been reduced to 6 percent with the aim of supporting the domestic jewellery sector, bringing down prices, and discouraging smuggling. However, the rapidly rising import bill and global geopolitical developments appear to have forced policymakers to reconsider that approach.
India currently remains the second-largest gold consumer in the world after China, and most of its demand is met through imports because domestic production is extremely limited. This heavy reliance on imports makes gold a major contributor to the country’s trade deficit.
Economic experts say the timing of the policy change is closely linked to the ongoing tensions in West Asia, which have begun to affect global energy markets and shipping routes. The conflict, particularly the war involving the United States and Iran, has led to the effective closure of the Strait of Hormuz, a critical global energy corridor.
India imports a substantial portion of its energy requirements from the region. Around 60 percent of India’s liquefied petroleum gas (LPG) consumption is imported, and nearly 90 percent of those supplies typically pass through the Strait of Hormuz. Any disruption in this route significantly increases the country’s energy import bill and puts additional strain on foreign exchange reserves.
The broader economic pressure is already visible in currency markets. The Indian rupee recently fell to a record low of ₹95.63 against the US dollar, reflecting concerns about rising import costs and global economic uncertainty.
Chief Economic Advisor V Anantha Nageswaran recently described the ongoing geopolitical situation as a “live stress test” for India’s balance of payments. According to him, the crisis could have direct implications for inflation, the current account deficit, and the stability of the national currency.
While the higher import duty may help reduce the immediate pressure on foreign exchange reserves, economists caution that excessively high taxes on gold could revive smuggling activities — an issue that the government has tried to control over the past decade. Policymakers will therefore need to carefully balance revenue goals, trade stability, and market demand in the coming months.
For now, the government’s message appears clear: limiting non-essential imports such as gold and silver is an important step toward safeguarding the country’s economic stability during a period of global uncertainty.