Explained: Why India increased gold import duty to 15 percent amid rising external pressure

The government has raised import duties on gold and silver to 15 per cent from 6 per cent, in a move aimed at curbing non-essential imports and easing pressure on India’s external accounts amid global uncertainty.

The decision comes at a time when gold imports have surged sharply in value due to elevated global prices, even as physical volumes have declined, pointing to a price-driven rise in India’s import bill.

According to the Finance Ministry, the increase in duty has been implemented through adjustments in the Social Welfare Surcharge (SWS) and the Agriculture Infrastructure and Development Cess (AIDC), effective May 13.

Why India raised gold import duty

The primary objective behind the move is to control the rising import bill and reduce pressure on the current account deficit (CAD), which widens when high-value imports increase foreign exchange outflows.

Gold imports, being one of India’s largest import items, have a direct impact on the country’s external balance. Policymakers aim to moderate demand by making imports more expensive during periods of global stress.

The step is also intended to support the rupee, which has recently faced pressure due to global volatility and rising import demand. Lower gold imports are expected to ease foreign exchange outflows and help stabilise the currency.

Another key factor is the need to conserve foreign exchange reserves amid geopolitical tensions and broader external risks, including disruptions in global trade flows.

Import trends and price impact

India’s gold imports rose over 24 per cent to an all-time high of USD 71.98 billion in 2025-26. However, volumes declined 4.76 per cent to 721.03 tonnes, highlighting that higher prices—not stronger demand—are driving the increase in value.

Gold prices have surged from USD 76,617.48 per kg in FY25 to USD 99,825.38 per kg in FY26.

Policy reversal

The latest hike reverses a reduction announced in the 2024-25 Budget, when customs duty on gold was cut to 6 per cent to support the gems and jewellery sector, reduce smuggling, and ease domestic prices.

India had last raised gold import duty to 15 per cent in 2022 amid pressure on the current account deficit following global disruptions.

Wider economic backdrop

Chief Economic Adviser V. Anantha Nageswaran has described the West Asia crisis as a “live balance of payments stress test”, with implications for inflation, the current account and exchange rate stability.

The Indian rupee recently touched a record low of 95.63 against the US dollar, reflecting broader external pressure.

Prime Minister Narendra Modi has also urged citizens to reduce discretionary spending, including postponing gold purchases, fuel use, and foreign travel, to conserve foreign exchange.

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