India Hikes Gold Import Duty to 15% on $72B Import Bill

May 13, 2026 | New Delhi

India more than doubled its gold and silver import tariff to 15% from 6% on Wednesday, according to Finance Ministry notifications, as a record $72 billion import bill in FY26 forced the government into its most aggressive precious metals duty intervention in over a decade. The new structure, 10% basic customs duty plus 5% Agriculture Infrastructure and Development Cess, also covers platinum, jewellery findings, and precious metal-related industrial goods, not just gold and silver. Prime Minister Narendra Modi had publicly urged citizens to stop buying gold for a year just four days earlier, on Sunday, a rare prime ministerial demand-suppression appeal that preceded Wednesday’s policy move by 72 hours and signals how long this decision had been in the pipeline.

The $72 Billion Import Bill That Made This Inevitable

India’s gold import bill hit a record $72 billion in FY26. That single number explains the government’s urgency more than any policy statement. Gold and crude oil are India’s two largest contributors to the current account deficit, and with crude already above $110 per barrel due to the Iran conflict, the government needed to act on at least one of the two levers it could directly control.

India’s foreign exchange reserves stood at $691.11 billion at end-March 2026, providing approximately 11 months of import cover, according to RBI reserve management data. That is not a crisis level. But the pace of depletion, driven by crude and gold simultaneously, prompted a proactive government response before reserves deteriorated further.

What stood out is the contradiction sitting inside the RBI’s own balance sheet. Gold’s share in India’s forex reserves rose to 16.7% from 13.92% in September 2025. The government is simultaneously accumulating gold in its own reserves and trying to stop citizens from buying it. That is not hypocrisy — it is a deliberate hedge against the same dollar pressure it is trying to reduce on the current account side. But it is the most revealing data point in this story.

Jewellery Stocks Already Priced the Hit—And Fell Again on Wednesday

The market did not wait for Wednesday’s notification. When Modi made his public appeal on May 10, jewellery stocks across BSE and NSE collapsed the next day. By May 11, the sector had already absorbed a significant re-rating:

Stock	May 11 Move	Price (May 11)	Q3 FY26 Growth
Sky Gold & Diamonds	-12.25%	Rs 475	—
Senco Gold	-11%	Rs 325.25	—
Kalyan Jewellers India	-10%	Rs 382.20	+42% YoY (India ops)
Titan Company	Sharp decline	—	+41% YoY (jewellery segment)

Source: BSE/NSE, May 11, 2026; Q3 FY26 growth figures from company earnings

That selloff happened on a speech alone. Then the notification hit.

When the government’s customs duty order took effect from midnight on Wednesday, jewellery stocks fell a second time; Kalyan Jewellers, Titan Company, Senco Gold, and others dropped up to 6% intraday on May 13, according to exchange data. That puts the combined two-session drawdown at 15–18% for the sector from its May 8 highs, before a single quarterly earnings report has reflected the actual demand impact.

Both Titan’s jewellery segment and Kalyan’s India operations had posted approximately 41–42% year-on-year growth in Q3 FY26. That growth trajectory is now the baseline against which a duty-hit Q1 FY27 will be measured, and the comparison is going to be difficult.

The Investment Demand Surge That Triggered the Response

This is not a wedding-season story. The government is responding to an investment demand cycle, not cultural consumption.

Gold ETF inflows in India surged 186% year-on-year in the March quarter to a record 20 metric tonnes, according to the World Gold Council. Indian investors have been systematically rotating out of equities, which delivered negative returns over the past year, and into gold as both a price-performance play and a hedge against rupee depreciation. The rupee has been one of Asia’s worst-performing currencies this year.

That scale of demand, 186% ETF inflow growth, is not price-sensitive in the way discretionary jewellery demand is. Investors chasing gold as an asset class do not stop because duties rise. They find alternatives: gold ETFs (which track international prices and bypass import duty entirely), sovereign gold bonds, or informal channels. The duty hike addresses physical import demand directly. It does not address the investment rotation thesis that is driving it.

Also Read: Record ETF Inflows Spark a Bigger Question: Is India’s Investment Strategy Changing Forever?

The Smuggling Trade-Off the Government Accepted

India had a documented smuggling problem before 2024. The duty cut in mid-2024 changed that, grey market activity fell significantly as the price arbitrage between official and unofficial channels narrowed. Wednesday’s hike to 15% reverses that condition entirely.

A Mumbai-based bullion dealer at a private bank, speaking anonymously as he was not authorised to comment to media, said grey markets are likely to become active again. At current gold price levels, the profit margin available to smugglers on unofficial imports is substantial, enough to absorb the risk premium of border and airport interdiction.

Surendra Mehta, national secretary at the India Bullion and Jewellers Association, said the duty increase was expected given current account pressures but flagged the demand consequence: gold and silver prices were already elevated, and adding 9 percentage points of import cost on top of spot prices risks suppressing legitimate consumption while pushing activity underground.

The government accepted this trade-off explicitly. Near-term forex relief was prioritised over the long-term grey market risk. Whether that calculus holds depends entirely on how long crude stays above $100 and whether the Strait of Hormuz reopens, the same variable driving the Moody’s GDP downgrade.

April Was the Preview—May Will Be the Test

The government had already been tightening before Wednesday. In April, a 3% IGST on gold and silver imports prompted banks to halt purchases entirely for over a month. April gold imports fell to a near 30-year low as a result. Banks eventually resumed after absorbing the IGST charge.

Wednesday’s 15% effective duty is more than twice the all-in cost structure that caused the April freeze. Bullion dealers expect a sharper and more sustained import contraction through May and June than what April’s IGST shock produced.

For jewellery manufacturers who export finished goods, the math is straightforward and painful: a 9 percentage point cost increase on inputs that were already at elevated spot prices compresses export margins directly. Companies holding pre-hike inventory face a cost basis adjustment on new purchases. Those passing through costs quickly to retail preserve margins; those absorbing the increase to hold retail prices face compression that will show up in Q1 FY27 results.

Key Data Points at a Glance

Read Next: Moody’s Cuts India 2026 Growth to 6% as Iran War Erases 0.8 ppt

What to Watch Next

The next two data triggers, India’s May gold import figures, due the third week of June, will show whether the 15% duty suppresses volumes below April’s near 30-year low or whether informal channels absorb the shock. The second trigger is Q1 FY27 earnings from Titan and Kalyan Jewellers, where the demand and margin impact of both the duty hike and Modi’s public appeal will appear as hard numbers for the first time.

FAQ

Why did India raise gold import duty to 15%?

India’s gold import bill hit a record $72 billion in FY26, adding directly to the current account deficit and pressuring the rupee, one of Asia’s worst-performing currencies this year. The government raised the effective duty from 6% to 15% (10% basic customs duty + 5% AIDC) to suppress import volumes and ease pressure on forex reserves, which stood at $691.11 billion at end-March 2026.

How did jewellery stocks react to the gold duty hike?

The market moved before the duty announcement. Following PM Modi’s appeal on May 10, jewellery stocks crashed on May 11, Sky Gold fell 12.25% to Rs 475, Senco Gold fell 11% to Rs 325.25, and Kalyan Jewellers fell 10% to Rs 382.20. Wednesday’s actual duty hike adds a hard policy layer on top of that sentiment re-rating. Both Titan and Kalyan had posted 41–42% YoY jewellery growth in Q3 FY26, making the Q1 FY27 demand outlook a material earnings risk.

Will India’s gold duty hike revive smuggling?

Industry officials warn it will. India cut duties in mid-2024, which had reduced grey market activity by narrowing price arbitrage. Restoring the effective duty to 15% recreates the smuggling incentive. A Mumbai-based bullion dealer said grey markets are likely to become active again given the profit margins available at current gold price levels. The India Bullion and Jewellers Association’s national secretary Surendra Mehta flagged the same risk publicly.