India's Gold Imports Plunge 70% After Duty Hike, Smuggling Revives
India's gold imports fell nearly 70% to 25-30 tonnes a month after the government more than doubled the customs duty to 15%, according to a Finance Ministry official cited by The Tribune. Reuters reports the higher levy has revived gold smuggling and is squeezing banks and refiners, even as import value keeps rising on higher prices.
Official imports fall nearly 70% after duty doubles
India's gold imports have dropped by almost 70% to 25-30 tonnes a month after the government more than doubled the customs duty on the metal to 15%, a senior Finance Ministry official told The Tribune. Before the increase, monthly imports ranged between 75 and 100 tonnes, according to the same official.
The drop in physical volumes contrasts sharply with the trend in import value. India's gold imports actually rose 34% year-on-year to $3.41 billion in May, driven by rising precious metal prices, The Tribune reported. Over April and May of fiscal year 2026-27 combined, gold imports climbed 60.14% to $9.04 billion, underlining how higher prices can push up the import bill even as tonnage falls.
Smuggling revival squeezes banks and refiners
According to Reuters, the tariff increase has fuelled a revival of gold smuggling into India and is squeezing banks and refiners that depend on legal, duty-paid import channels. The higher levy widens the gap between official and unofficial routes, making illicit supply chains more attractive to traders and consumers seeking to avoid the added cost.
Import bill and policy rationale
India's gold imports reached an all-time high of $71.98 billion in fiscal year 2026, up 24% in value, even as volume fell 4.76% to 721.03 tonnes, The Tribune reported. Demand from the jewelry industry drives gold imports into India, the world's second-largest gold consumer after China, and the resulting foreign exchange outflow has drawn government attention.
The duty increase follows Prime Minister Narendra Modi's call to curb gold purchases and pursue austerity measures aimed at cutting unnecessary foreign exchange spending. Precious metals account for more than 5% of India's total imports. With India's import bill expected to rise further because of uncertainties in West Asia, the government wants to prioritize foreign exchange for crude oil, fertilisers, industrial raw materials and capital goods that directly support economic activity and food security.
Gold monetisation floated as alternative
On June 3, Shamika Ravi, a member of the Economic Advisory Council to the Prime Minister, said India should expand gold monetisation beyond traditional gold loans and develop additional financial instruments linked to the precious metal. The goal, she said, is to reduce the country's dependence on gold imports and ease pressure on foreign exchange reserves.