New Delhi, India – In a bid to safeguard macroeconomic stability and conserve foreign exchange, the Indian government has more than doubled the customs duty on gold and silver, raising it from 6% to 15%. Similar hikes were applied to platinum, increasing its import duty from 6.4% to 15.4%. The move comes amidst mounting pressure on the current account deficit and heightened global uncertainty.
Challenges to Reducing the Import Bill
Despite the steep increase in customs duty, experts and industry players are skeptical about its immediate impact on India's overall import bill for precious metals. While higher duties might temper demand volumes, the consistently elevated international prices of gold and silver could offset any potential reduction in value.
For instance, in the fiscal year 2026, gold import volumes saw a slight decline of 4.76% to 721.03 tonnes. However, the unit value per kilogram of gold surged by 30.3%, leading to a 24% rise in the total value of gold imports, reaching $71.98 billion from $58.01 billion in FY25. Similarly, silver imports in FY26 jumped by 42.03% in quantity and nearly 150% in value, totaling $12.05 billion.
A report by Barclays India noted that elevated international gold prices are likely to outweigh any demand-dampening effects of the duty hike. Aastha Gudwani, India Chief Economist at Barclays India, stated, “We do not think the current gold import duty hike will significantly affect the current account deficit.” She predicted that despite a potential volume decline, the gold import bill could rise further in FY27, adding an estimated $15 billion.
Concerns Over Trade Agreements and Smuggling
Further complicating the situation are existing preferential trade agreements, particularly the India-UAE Comprehensive Economic Partnership Agreement (CEPA). Under CEPA, India committed to gradually reducing import duties on silver from the UAE, eventually reaching zero by 2031. Currently, silver imports from the UAE enjoy a concessional tariff of 7%, creating an 8-percentage-point duty gap with the new general tariff of 15%.
Ajay Srivastava, Founder of the Global Trade Research Initiative (GTRI), highlighted that this widening tariff gap could incentivize greater routing of global bullion through Dubai, even though the UAE is not a primary miner of these metals. GTRI warned that this creates a significant arbitrage opportunity that will only expand as CEPA tariffs continue to fall.
Similarly, gold imports from the UAE benefit from a Tariff Rate Quota (TRQ) system, allowing imports at a tariff one percentage point below the normal Most-Favoured-Nation (MFN) rate. With the new MFN tariff at 15%, gold imported under the UAE quota would enter at 14%. Industry players also express concerns that the higher duties could lead to an increase in the smuggling of precious metals into the country.
Industry Response and Future Outlook
Government sources indicated that the measure is temporary, aimed at moderating non-essential imports during a period of global economic uncertainty and the ongoing West Asia crisis. Rajesh Rokde, Chairman of the Gems and Jewellery Council (GJC), backed the move, urging the trade to remain calm and confident. He affirmed GJC's commitment to working with the government to ensure stability and sustained growth for the industry, which has historically demonstrated resilience.
While the government hopes to curb imports and protect its foreign exchange reserves, the interplay of high global prices, preferential trade routes, and the potential for increased illicit trade means the full impact of the gold and silver customs duty hike on India's import bill remains uncertain.