The steep hike in gold import duty has sharply raised domestic bullion prices and triggered a broad slowdown in India’s jewellery market, with traders and jewellers across key centres reporting weaker demand, liquidity stress and a possible rise in smuggling activity.
The increase in customs duty has pushed gold prices up by nearly 10 per cent, forcing consumers to cut back on purchases and shift towards lighter jewellery and lower-carat options, industry participants said.
Sector Stress
The Gem and Jewellery Export Promotion Council (GJEPC) cautioned that higher duties could further inflate prices and encourage smuggling, while exporters are already grappling with tighter working capital conditions. According to the industry body, exporters dealing in duty-free gold are now required to furnish bank guarantees of ₹28–30 lakh per kg, severely straining liquidity and slowing manufacturing cycles, especially for MSMEs that form a significant part of the sector.
In Ahmedabad, jewellers said the sharp rise in prices has quickly altered retail buying behaviour. Customers who earlier bought standard 8–10 gram jewellery pieces are increasingly opting for lighter designs to stay within budget. The exchange of old gold has also emerged as a dominant trend in transactions.
Sachin Sawrikar, founder and managing partner at Artha Bharat Investment Managers, said India’s gold demand is deeply rooted in household savings behaviour and cultural consumption patterns, making it difficult to curb through price interventions alone. He warned that higher duties historically widen the gap between official and informal channels, thereby increasing the risk of smuggling.
In Bengaluru, jewellers said near-term sentiment may soften, though structural demand linked to weddings and rituals remains intact. “Indian gold buying is culturally deep-rooted and not easily deferred,” said Varghese Alukkas, Managing Director of Jos Alukkas, adding that the industry is watching closely to see whether the current slowdown is temporary or behavioural.
In Chennai, N Anantha Padmanabhan, Managing Director of NAC Jewellers, said the duty hike is likely to hurt sales volumes and could encourage smuggling activity. He said reviving the gold monetisation scheme and mobilising idle household gold would be a more sustainable alternative to repeated increases in import duties.
In Hyderabad, traders said gold prices jumped by around ₹800 to ₹16,500 per gram after customs duty was raised to 15 per cent from 6 per cent, resulting in weaker buying activity and liquidity constraints.
Kolkata-based Senco Gold also warned of a sharp impact on volumes. “Volumes will be impacted. Consumers would prefer lighter jewellery and lower-carat gold. Old gold exchange will increase going forward,” said MD & CEO Suvankar Sen. He estimated a 10–15 per cent decline in volumes, although overall value could remain elevated due to higher prices. “For gifting purposes, demand for diamond jewellery is expected to increase amid high gold prices,” he added.
Across markets, jewellers maintained that India’s long-term appetite for gold remains structurally resilient despite the near-term disruption caused by the duty hike.
Inputs from Avinash Nair in Ahmedabad; Anupama Ghosh in Mumbai; Aishwarya Kumar in Bengaluru; Rohan G Das in Chennai; Naga Sridhar G in Hyderabad & Mithun Dasgupta in Kolkata