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India has more than doubled import tariffs on gold and silver in an effort to shore up the rupee and mitigate the economic disruption caused by higher energy prices and the ongoing Iran war.
The Indian government raised the import duty on both gold and silver from 6 per cent to 15 per cent, a move analysts expect to dampen demand in one of the world's largest bullion markets. The decision follows Prime Minister Narendra Modi's public appeal urging Indian citizens to curtail spending on fuel, foreign travel and gold, all of which contribute significantly to the country's growing import bill.
India imported $72bn worth of gold in the financial year to 31 March 2026, a 24 per cent increase in value terms on the previous year. Silver imports rose nearly 150 per cent to $12bn over the same period. Gold alone accounts for nearly 10 per cent of India's total import bill of $775bn in FY26, with crude oil ($134.7bn), vegetable oils ($19.5bn) and fertilisers ($14.5bn) among the other major contributors.
India's trade deficit for the year to the end of March widened to $120bn from $95bn the previous year, driven by rising costs for energy, fertilisers and gold. The International Monetary Fund has projected that India's current account deficit could reach $84.5bn in 2026, approximately 2 per cent of GDP.
The rupee has fallen 5 per cent against the US dollar since the United States and Israel began bombing Iran at the end of February and is now trading below 95.5 rupees to the dollar, despite multiple interventions by the Reserve Bank of India. The central bank's dollar reserves fell $40bn in the first month after the war began. India's forex reserves currently stand at around $690.69bn.
"A duty hike was going to happen after the prime minister's announcement. The duty increase brings immediate relief to the government. If they have to stop the falling rupee overnight, this is the only measure."
Surendra Mehta
National Secretary, India Bullion and Jewellers Association
Mehta added that the duty increase is expected to reduce demand for gold in India by around 10 per cent.
Analysts at Jefferies noted in a report that the rise in import duties would likely push domestic gold prices higher. Gold prices fell 0.6 per cent on Wednesday following the announcement, to $4,685 per troy ounce. Shares in listed gold merchants Kalyan Jewellers and Thangamayil Jewellery fell more than 5 per cent on the news, while gold ETFs offered by ICICI Prudential and Nippon India jumped by more than 4 per cent.
"This is a structural shift that is stacking up against gold a bit at the moment, in terms of its recovery pathway from here."
Helen Amos
Commodities Analyst, BMO
Amos noted that India's role in the gold market had been supercharged when the government slashed import duties on bullion in July 2024 in an effort to reduce smuggling, a policy change that fuelled a buying frenzy and contributed to a historic rally in the months that followed. Last year, India accounted for approximately one-third of global gold jewellery demand and one-fifth of global bar and coin demand, according to the World Gold Council.
The conflict has disrupted shipping through the Strait of Hormuz, a critical oil route, contributing to crude prices rising above $100 per barrel. India imports 88 per cent of its oil needs, adding further pressure on the country's foreign exchange position.
Goldman Sachs estimated in an October report that Indian households held gold worth nearly $3.8tn, equivalent to almost 90 per cent of India's GDP, noting its significance as a store of value, inflation hedge and safe-haven asset. Gold was trading at just over $4,000 per ounce in October and has since risen to $4,700 per ounce.
Modi's appeal has had broader market implications. Airline and travel-related stocks have cooled, with analysts flagging sentiment weakness as demand for overseas travel is expected to soften. Luxury hotels and hospitality companies reliant on foreign tourism and destination weddings have also faced pressure. Petroleum company stocks lagged in market trading as investors anticipated slower volume growth following the prime minister's call for reduced fuel use and a revival of work-from-home arrangements.
"Gold prices recently slipped even as oil surged, showing how inflation fears and interest rate expectations are limiting gold's rally despite geopolitical tensions. Crude has jumped sharply after US rejection of Iran's proposal, worsening inflation and energy security fears."
Gaurav Garg
Lemonn Markets Desk
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