In a major policy reversal amid rising global uncertainty, the Centre on Wednesday increased customs duty on gold and silver imports to 15 per cent from 6 per cent, signalling a tougher stance on non-essential imports as pressure mounts on India’s foreign exchange reserves due to the ongoing West Asia conflict.
The move comes at a time when crude oil prices and shipping disruptions linked to the geopolitical situation in West Asia have heightened concerns over India’s import bill and Current Account Deficit (CAD). Government sources said the decision is aimed at protecting macroeconomic stability and ensuring foreign exchange reserves are prioritised for essential sectors such as energy, fertilisers, defence and industrial raw materials.
The revised duty structure includes a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess (AIDC) on gold and silver imports, taking the effective import tax to 15 per cent. Import duty on platinum has also been raised sharply to 15.4 per cent from 6.4 per cent.
The revised rates will also apply to related items, including gold and silver dore, coins and findings.
Why has the government increased import duty on gold and silver?
According to Finance Ministry sources, the decision has been taken to moderate “avoidable” imports at a time when external economic vulnerabilities remain elevated due to geopolitical tensions.
“India’s foreign exchange resources must be prioritised towards essential imports such as crude oil, fertilisers, industrial raw materials, defence requirements, critical technologies, and capital goods,” sources said.
Officials stressed that the step is not intended to restrict consumer access to precious metals.
“It is a carefully calibrated and proportionate intervention designed to encourage moderation, not a ban,” sources added.
The duty hike effectively reverses a major cut announced in the Union Budget 2024-25, when customs duty on gold and silver was reduced from 15 per cent to 6 per cent amid relatively stable global economic conditions.
Gold ETF inflows rise despite higher import costs
India remains one of the world’s largest consumers of gold, driven by jewellery demand, investment buying and festive purchases. Even as import costs rise, investor interest in gold has remained strong.
Data released by the Association of Mutual Funds in India (AMFI) showed inflows into gold exchange-traded funds (ETFs) rose 34 per cent month-on-month to Rs 3,040 crore in April, up from Rs 2,265 crore in March.
Silver ETFs, however, continued to see withdrawals for the third straight month. AMFI data showed silver ETFs recorded an outflow of Rs 126 crore in April, following outflows of Rs 683 crore in March and Rs 826 crore in February.
Earlier this month, Prime Minister Narendra Modi had urged citizens to avoid non-essential gold purchases for a year and adopt austerity measures to help conserve foreign exchange reserves amid the global uncertainty linked to the West Asia crisis.
Government sources said the latest intervention is intended to reduce vulnerability to external shocks before economic pressures intensify further.