India Raises Customs Duties on Gold and Silver to Curb Imports and Support Rupee

In an effort to contain increasing pressure on foreign exchange reserves and support the stability of the rupee, India has taken a sharp step towards restricting imports of precious metals by raising customs duties on gold and silver to 15% from 6%. This shift reflects a clear priority to preserve the dollar and reduce non-essential imports.

The decision comes at a sensitive time, with escalating geopolitical tensions in global markets, especially in the Middle East, coupled with rising oil prices. These factors intensify pressure on India's balance of payments and double the demand for the dollar.

India relies almost entirely on gold imports to meet its massive domestic demand, whether for savings or social and religious occasions. This makes the yellow metal one of the largest drains on the country's foreign currency. Data indicates that gold imports reached approximately $71.98 billion during 2025-2026, representing nearly 10% of India's total import bill.

Under the new tax structure, gold and silver imports will be subject to a basic customs duty of 10%, in addition to an agricultural infrastructure development cess of 5%, bringing the total tax burden to 15%, according to an official notification issued by the Indian Revenue Department under the Customs Act.

The move signals a broader government direction to curb demand for precious metals and alleviate pressure on the current account, especially with the continued rise in the oil import bill. New Delhi also bets that the increased cost of gold will push consumers towards less dollar-draining alternatives, such as recycling old gold or shifting to other investment instruments like gold-backed exchange-traded funds.

Indian Prime Minister Narendra Modi had called on citizens during the weekend to postpone gold purchases for a full year, in addition to reducing fuel consumption and limiting foreign travel. This direct message reflects official concern over the depletion of foreign reserves.

The government believes that reducing gold imports by 30% to 40% could save between $20 and $25 billion annually, providing significant breathing room for the rupee amidst current global market fluctuations.

The decision quickly impacted markets, with gold and silver prices rising by more than 6% after the announcement. Shares of listed jewelry companies, including Titan Company, Kalyan Jewellers, and Senco Gold, also came under strong pressure, as investor concerns grew over slowing demand and rising import costs.

Gold traders warn that high duties could stimulate the black market and lead to a resurgence of smuggling operations across borders if the gap between local and international prices widens, especially in a market where gold holds deep cultural and social significance.

These measures reflect a clear shift in India's economic policy, from encouraging gold consumption as a traditional savings vehicle to attempting to control it as an increasing burden on foreign exchange resources and the stability of the local currency.