The Indian government is reportedly weighing a reduction in import duties on gold and silver. This comes as the current 15% levy, implemented to curb precious metal imports, has instead been linked to a significant expansion of the grey market, according to industry reports and sources.
High Duties Fueling Illegal Trade
Since May 13, the effective customs duty on gold and silver was sharply increased to 15% from 6%. Platinum duties also rose from 6.4% to 15.4%. The primary objective was to make precious metal imports more expensive, thereby containing foreign exchange outflows. However, industry stakeholders, including Rajesh Rokde, Chairman of the Gems & Jewellery Council, have indicated that the policy has not achieved its intended effect.
“The duty isn't proving effective,” Rokde told the Economic Times, emphasizing that the jewellery industry had previously warned the government about the potential for higher duties to encourage illegal trade. He noted that imports remained largely unaffected, while the grey market expanded significantly.
Discussions regarding a policy reconsideration are "certainly" ongoing, though no final decision has been announced. The government may be waiting for an opportune moment to implement changes.
Revenue Boost and Enforcement
Despite the challenges, the increased duties have generated substantial revenue for the government. Between May 13 and August 2, the Centre collected ₹10,463 crore in customs duty from precious metal imports. Gold accounted for the lion's share at ₹10,040 crore, with silver contributing ₹328 crore and platinum ₹95 crore.
Alongside the revenue increase, enforcement agencies have intensified efforts against illegal imports. Between May 13 and June 30, 287 cases were registered, leading to the seizure of 160.91 kg of gold and 116 arrests. Customs field formations and the Directorate of Revenue Intelligence (DRI) continue to monitor smuggling activities.
India's Gold Consumption and Import Trends
India stands as the world's second-largest consumer of gold, typically importing between 700 and 900 tonnes annually. Government data for FY26 showed gold imports surging 24% in value to a record $71.9 billion, even as import volumes saw a slight decline to 721 tonnes.
The Reserve Bank of India (RBI) holds 880.52 tonnes of physical gold as of May 29, 2026, and has clarified that it has not sold any of its holdings, refuting earlier reports.
The government faces a complex situation, balancing the need for customs revenue and foreign exchange control against the unintended consequence of fostering a robust grey market for gold and silver.