Gold and silver prices in India are expected to surge after the Centre sharply raised import duties on the two precious metals from 6% to 15%. The move came barely 24 hours after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year in order to protect India’s foreign exchange reserves. The sudden policy shift has triggered concern among jewellers and investors, who fear a fresh spike in jewellery prices ahead of the festive and wedding season.
From Wednesday, the government imposed a 10% import duty along with a 5% Agriculture Infrastructure and Development Cess on gold and silver imports, effectively pushing the total levy to 15%. Traders believe the higher tax burden will directly impact retail prices across the country.
According to government sources, the decision is aimed at reducing excessive gold imports, narrowing the trade deficit, and easing pressure on the falling rupee against the US dollar. India remains one of the world’s largest consumers of gold, importing the majority of its domestic requirement every year.
The development gains significance because Prime Minister Narendra Modi had only recently appealed to citizens to refrain from purchasing gold for at least a year. The Prime Minister reportedly stressed the need to conserve India’s foreign exchange reserves at a time of rising global economic uncertainty.
Experts tracking the economy say the Centre is attempting to control the massive outflow of foreign currency used for importing gold. Official data shows India’s forex reserves declined by nearly 7.79 billion US dollars during the last week of April, bringing total reserves down to around 690.69 billion dollars.
India consumes nearly 700 to 800 tonnes of gold annually, but domestic production remains extremely limited at just one to two tonnes. As a result, the country depends heavily on imports to meet more than 90% of its gold demand, leading to significant expenditure in foreign currency.
The situation has become more challenging amid tensions in West Asia, which have driven up crude oil prices and increased overall import costs. The resulting strain on India’s external finances is believed to be one of the key reasons behind the government’s latest move and Modi’s public appeal to citizens.
Jewellery traders fear that the higher import duty may reduce consumer demand in the short term, while also pushing up prices of ornaments, coins, and investment-grade bullion across Indian markets.
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