Gold, Silver and Platinum Duty Hiked Two and Half Times to Imports, Markets to Go Underground

The Indian government has sharply increased customs duties on imports of precious metals amid rising geopolitical and economic uncertainty linked to the ongoing West Asia crisis.

Key Changes in Import Duties

· Gold and silver import duty increased from 6% to 15%

· Platinum import duty raised from 6.4% to 15.4%

· Higher duties also apply to:

o Gold and silver dore

o Coins

o Jewellery findings

Why the Government Took This Step

The move is aimed at:

· Conserving India’s foreign exchange reserves

· Reducing pressure on the Current Account Deficit (CAD)

· Managing risks from:

o Rising crude oil prices

o Disruptions in global shipping routes

o Geopolitical tensions in West Asia

Since India imports almost all of its gold requirements and a significant portion of crude oil, higher import bills could worsen external-sector vulnerabilities and inflation.

Government’s Economic Rationale

Officials said foreign exchange should be prioritised for essential imports such as:

· Crude oil

· Fertilisers

· Industrial raw materials

· Defence equipment

· Critical technologies

· Capital goods

In contrast, precious metals are viewed largely as:

· Consumption-driven imports

· Investment assets with limited direct economic multiplier effects

Policy Approach

According to officials:

· The measure is a calibrated and preventive step

· It is not prohibitory or anti-consumer

· Instead of imposing import bans or quantitative restrictions, the government opted for price-based disincentives while preserving market flexibility

PM Modi’s Appeal

The duty hike follows Prime Minister Narendra Modi’s recent appeal urging citizens to avoid buying gold for a year to help conserve foreign exchange reserves.

Industry Reaction

Suvankar Sen said:

· Gold prices are likely to remain elevated for about a year

· Jewellery volumes may decline by 10–15%

· Consumers are expected to shift toward lighter-weight jewellery purchases

Policy Reversal from Budget 2024-25

The latest hike reverses the duty reductions announced in the Union Budget 2024-25, when:

· Gold and silver duties were cut from 15% to 6%

· Platinum duty was reduced from 15.4% to 6.4%

Officials said the earlier cuts were made when India’s external-sector position was more comfortable.

The government has sharply increased customs duty on imports of precious metals such as gold, silver and platinum, saying the move is aimed at protecting India’s macroeconomic stability and conserving foreign exchange reserves at a time of rising global uncertainty linked to the ongoing West Asia crisis, according to ET Bureau sources.

Import duty on gold and silver has been raised from 6% to 15%, while duty on platinum has gone up from 6.4% to 15.4%. The changes also apply to products such as gold and silver dore, coins and findings.

The move comes days after Prime Minister Narendra Modi on Sunday urged people to avoid buying gold for a year in order to help conserve the country’s foreign exchange reserves. India meets almost all of its gold demand through imports.

The latest decision comes amid volatility in global crude oil markets and international shipping routes due to geopolitical tensions in West Asia. Since India imports a large share of its crude oil requirements, any sustained rise in energy prices or supply disruptions could push up the country’s import bill, widen the Current Account Deficit (CAD) and add to inflationary pressures.

The government believes foreign exchange resources should be prioritised for essential imports such as crude oil, fertilisers, industrial raw materials, defence equipment, critical technologies and capital goods, which directly support manufacturing, infrastructure, food security and economic activity.

In comparison, precious metals are largely consumption and investment-driven imports that lead to significant foreign exchange outflows without having the same economic multiplier effect as sectors like energy, infrastructure or technology, officials said.

"The increase in customs duty on precious metals is intended to moderate avoidable import demand and ease pressure on the external account. The measure is neither prohibitory nor anti-consumer in nature,” sources noted, describing it as a calibrated step to manage external-sector risks.

Officials said the duty hike reflects a preventive approach to managing external vulnerabilities before they intensify further. Instead of imposing quantitative restrictions or stricter import controls, the government has opted for what it described as moderate price-based disincentives that still preserve market flexibility and consumer choice.

According to Suvankar Sen, MD and CEO of Senco Gold, gold prices are likely to remain at current levels for around a year. “Volumes might get impacted by 10-15%, but value-wise, it will remain at a higher level. Consumers will buy lighter-weight jewellery,” he added.

The government also pointed out that customs duties on precious metals have historically been adjusted depending on macroeconomic conditions. In the Union Budget 2024-25, duties on gold and silver were reduced from 15% to 6%, and on platinum from 15.4% to 6.4%, when India’s external-sector position was considered more comfortable.