Pointing out that hiking import duties has historically failed to meaningfully curb gold imports, Gem and Jewellery Export Promotion Council (GJEPC) on Wednesday said the government’s latest move may only push up domestic gold prices, fuel smuggling and worsen liquidity pressures for exporters and MSME manufacturers.
The government recently increased . While backing Narendra Modi’s broader call for reducing non-essential imports and supporting the economy, the industry body said higher duties have rarely reduced gold imports in proportion to rising prices. “Despite gold prices doubling recently, imports have not declined proportionally. Such measures often fuel smuggling and escalate export costs,” GJEPC said in a statement.
GJEPC stated that exporters will face Bank Guarantees of ₹28-30 lakhs per kg of duty-free gold from Nominated Agencies, severely blocking working capital and stifling exports. The most severe impact of this policy will be felt by MSME manufacturers, who are the “backbone” of our industry, accounting for 80 per cent of GJEPC’s membership, who are currently facing a critical liquidity crunch.”
The council said it convened a meeting with major retailers and manufacturers following the Prime Minister’s appeal and has written to Modi proposing a set of industry-led measures aimed at reducing import dependence and promoting self-reliance. Among the measures proposed are promoting lower-carat jewellery such as 18K and 14K products, encouraging consumers to exchange old gold for new jewellery, reviving the Gold Monetisation Scheme (GMS) in a more viable format, and discouraging investment demand for gold bars, billets and coins. According to GJEPC, promoting lower-carat jewellery could potentially reduce gold imports by 20-30 per cent.
The body noted that investment in gold bars, billets and coins currently accounts for nearly 20-30 per cent of total gold imports and said reducing such demand could help ease import pressures. GJEPC also sought special incentives for gold jewellery exporters to help the sector earn foreign exchange amid ongoing global economic uncertainty.
The council said it would soon submit a detailed proposal to the government for reviving the Gold Monetisation Scheme to tap India’s estimated 25,000 tonnes of household gold holdings.
Echoing similar concerns, Sachin Sawrikar Founder and Managing Partner, Artha Bharat Investment Managers said the steep increase in import duties may ultimately strengthen grey-market activity rather than reduce India’s appetite for precious metals. “India’s appetite for precious metals is structural, not cyclical; it is woven into savings culture, festive demand, and portfolio behaviour across hundreds of millions of households. When the price of the legal channel rises this steeply, a well-established informal trade simply fills the gap,” he said.
Sawrikar pointed to the sharp rise in gold smuggling following the 2013 duty hikes and warned that any expected savings in foreign exchange reserves may prove “largely illusory”. He added that a more sustainable solution would involve strengthening gold monetisation schemes and developing financial products linked to gold that can reduce dependence on physical imports.
Market participants also flagged a mixed sectoral impact from the duty hike. According to Sumit Singhania, Research Head at Bajaj Broking, jewellery companies such as Titan Company, Kalyan Jewellers, and Sky Gold & Diamonds may face pressure as higher tariffs push up domestic gold prices and could weaken discretionary demand for jewellery, coins and medallions.
However, he added that gold financing companies such as Muthoot Finance and Manappuram Finance may benefit from higher collateral values, while gold futures on the Multi Commodity Exchange of India surged nearly 6% following the announcement.