In a swift and sharp reaction to recent government policy measures, India’s gold imports have plummeted by roughly 70%, dropping to just 25-30 tonnes over the past month. This significant decline follows the Centre’s decision to more than double the customs duty on the yellow metal. The strategic move aims to curb the outflow of foreign exchange and prioritize essential economic imports amid growing geopolitical uncertainties.
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The Impact of the May Duty Hike
Effective May 13, the import duty on gold and silver was hiked from 6% to 15%. Prior to this revision, India was importing between 75 and 100 tonnes of gold per month. According to official sources, the sudden policy shift has successfully compressed import volumes to nearly a third of their previous levels.
However, while the physical volume of gold entering the country has shrunk dramatically, the financial cost has moved in the opposite direction. Driven by rallying global prices for the precious metal, India saw its gold import bill increase in value.
- mport Volume (Previous Average): 75–100 tonnes per month
- Import Volume (Current Data – Post-Hike): 25–30 tonnes per month
- May Import Value: 3.41 billion Dollar (up 34% YoY)
- Customs Duty (Previous): 6%
- Customs Duty (Current – Post-Hike): 15%
Why the Government Stepped In
India remains the world’s second-largest consumer of gold, trailing only China, with demand overwhelmingly driven by the domestic jewellery industry. Because the country mines very little of its own gold, these purchases account for over 5% of India’s total imports, resulting in a massive outflow of foreign exchange.
The aggressive duty hike aligns with Prime Minister Narendra Modi’s recent call for citizens to adopt austerity measures and curb avoidable gold purchases. With ongoing tensions and uncertainties in West Asia threatening to inflate India’s overall import bill, the government is strictly prioritizing its foreign exchange reserves. The focus is now on securing essential imports that directly sustain economic activity and food security, such as:
- Crude oil
- Fertilisers
- Industrial raw materials
- Capital goods
Broader Financial Year Trends
The recent drop in volume comes on the heels of a record-breaking financial year for gold values.
During the previous fiscal year (FY26), the total value of gold imports hit an all-time high of 71.98 billion dollar, representing a 24% increase, even as the actual physical volume dipped slightly by 4.76% to 721.03 tonnes. This trend of high valuations carried into the new fiscal year, with imports surging by 60.14% to reach 9.04 billion dollar during the April-May FY27 period alone.
By stepping in with a 15% duty, policymakers are attempting to break this cycle, ensuring that surging global gold prices do not disproportionately drain the nation’s economic resources.
FAQ’s
1. Why have India’s gold imports fallen sharply?
India’s gold imports dropped by around 70% after the government raised customs duty on gold and silver from 6% to 15%. The higher duty increased import costs, reducing demand and import volumes significantly.
2. How much gold was India importing before and after the duty hike?
Before the duty increase, India imported approximately 75-100 tonnes of gold per month. Following the hike, monthly imports have fallen to around 25-30 tonnes.
3. Why did the government increase customs duty on gold?
The government raised the duty to reduce foreign exchange outflows, control non-essential imports, and ensure that foreign currency reserves are available for critical imports such as crude oil, fertilizers, industrial raw materials, and capital goods.
4. Did the value of gold imports also decline?
No. Despite lower import volumes, the value of gold imports increased due to higher international gold prices. India’s gold import bill reached 3.41 billion dollar in May, marking a 34% year-on-year increase.
5. What were the broader gold import trends in the previous financial year?
In FY26, India’s gold import value reached a record 71.98 billion dollar, up 24% from the previous year. However, the physical volume of imports declined by 4.76% to 721.03 tonnes, reflecting the impact of rising global gold prices.
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