India's Gold Import Duty Hike: A Move to Stabilize the Economy

In a strategic economic maneuver, India has hiked the gold import duty to 15 percent, more than doubling it from the former 6 percent rate. This decision is aimed at curbing non-essential imports and prioritizing the conservation of foreign exchange reserves for essential imports like crude oil and fertilizers. By discouraging domestic demand for gold, the government hopes to mitigate the nation's hefty import bill exacerbated by geopolitical tensions in West Asia.

The duty hike has already influenced domestic gold prices, with 24-carat gold reaching a peak of Rs 1,65,350 per 10 grams in the national capital, a notable increase from the prior price of Rs 1,56,800 per 10 grams. India, being the second-largest gold importer after China, saw gold imports surge to an unprecedented USD 71.98 billion in 2025-26 even as the shipment volume dipped, primarily due to high international prices.

Despite these efforts, the effectiveness of import duty hikes remains questionable. Historically, while such measures have reduced import volumes, they have not significantly cut the import bill due to persistent high global market prices. Furthermore, there are concerns about encouraging gold smuggling circuits looking to capitalize on domestic demand while circumventing increased duties. Previous policies, like the gold monetization scheme and the Sovereign Gold Bond scheme, were introduced to reduce import reliance but faced challenges and were eventually discontinued in 2025.

(With inputs from agencies.)