India, the world’s second-largest gold consumer, has raised tariffs on gold and silver to 15 per cent from 6 per cent in a bid to curb imports and ease pressure on its foreign exchange reserves, as the Iran war strains New Delhi’s balance of payments. India meets nearly all of its domestic gold demand through imports and has repeatedly sought to curb consumption. Gold is deeply woven into India’s weddings, festivals and cultural traditions, making purchases more essential than discretionary.
WHY IS INDIA TARGETING GOLD AND SILVER IMPORTS?
India’s current account deficit is under pressure from precious metals imports, which New Delhi views as non-essential.
While gold and silver import volumes have remained broadly steady, soaring prices have sharply increased the bill, widened external outflows and weighed on the rupee.
India spent a record $84 billion on gold and silver imports in the fiscal year to March, from $35.5 billion a decade earlier.
India, which is also the world’s largest consumer of silver, uses it in jewellery, coins, bars and industrial applications ranging from solar energy to electronics.
Over the past year, demand has been driven more by investment than traditional jewellery and silverware, with inflows into silver ETFs rising to a record high.
DO HIGHER TARIFFS CURB DEMAND?
Indian buyers are price-sensitive, and sharp price rises often prompt them to delay purchases.
Yet despite local gold prices rising by 443 per cent over the past decade, annual demand has remained broadly steady at 666-803 metric tons, averaging about 718 tons.
Demand was also resilient when India raised gold import tariffs to 10 per cent from 2 per cent between 2012 and 2013. After already absorbing a 76.5 per cent rise in gold prices in 2025, buyers are unlikely to stop purchasing because of a 9 per cent tariff hike.
Indian households buy gold for long-term value and a hedge against inflation and currency weakness, while in rural areas farmers often use it as a financial buffer during emergencies.
Gold-backed loans are also among the quickest ways for millions of Indians to access funds, with banks and finance companies offering credit within minutes.
WHICH GOLD DEMAND SEGMENT WILL BE HIT HARDEST?
Jewellery demand has traditionally accounted for nearly 75 per cent of India’s total gold consumption, while investment demand – in the form of coins, bars and gold exchange-traded funds (ETFs) – makes up the rest.
Demand for jewellery was already weakening because of high prices, and further gains are likely to hit purchases in the short term and push buyers towards lower-carat items.
Investors buy gold in anticipation of price gains, while Indian consumers traditionally view the metal as a safe-haven asset and a hedge against inflation.
Higher tariffs raise local prices, reinforcing gold’s appeal as an appreciating asset. Rising prices can also draw in new investors worried about missing further gains. Investment demand for gold surpassed jewellery consumption for the first time in the March quarter as investors turned to the metal amid weak equity returns. Inflows into local gold ETFs have been rising and are likely to remain strong.
WILL THE TARIFF RISE SPUR GOLD SMUGGLING?
Rising gold prices had already widened the margins for so-called grey market operators and the latest duty hike has pushed them to about 18 per cent, from around 9 per cent.
Unofficial gold imports remained above 100 tons until 2023 but fell sharply after New Delhi cut tariffs in 2024. They dropped to 69.2 tons in 2024 from 156.1 tons in 2023, and declined further to 20.4 tons in 2025.
The margin on smuggling a kilogram of gold has climbed to a record ₹30 lakh, creating a stronger incentive for grey market operators.