Gold, silver imports to get costlier as govt hikes customs duty after PM's appeal
Gold, silver imports to get costlier as govt hikes customs duty after PM's appeal
M.U.H
13/05/20267
The government on Wednesday sharply raised import duties on gold and silver to 15 per cent from 6 per cent, days after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year amid economic stress linked to the Iran war and pressure on foreign exchange reserves.
The Centre imposed a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess (AIDC), aiming to curb imports of the precious metals, narrow the trade deficit and support the rupee, which hit an all-time low of 95.75 per dollar.
The duty hike also came despite a government source telling Reuters earlier this week that there were no immediate plans to raise duties on gold and silver imports after PM Modi’s appeal.
India, the world’s second-largest consumer of gold and largest consumer of silver, relies heavily on imports to meet domestic demand. The move is expected to dampen consumption, especially at a time when gold and silver prices are already elevated.
Demand for gold in India has surged over the past year amid rising prices and weak returns from equities. According to the World Gold Council, inflows into India’s gold exchange-traded funds (ETFs) jumped 186 per cent year-on-year in the March quarter to a record 20 metric tonnes.
“As expected, the government has raised duties to curb the current account deficit. However, this could affect demand, as gold and silver prices were already high,” said Surendra Mehta, national secretary at the India Bullion and Jewellers Association.
India had already begun tightening gold imports in recent weeks by levying a 3 per cent integrated GST (IGST) on gold and silver imports, forcing banks to temporarily halt imports for over a month. April imports subsequently fell to a near 30-year low.
Bullion dealers now expect imports to decline further after the latest duty increase. Industry officials also warned that higher taxes could revive gold smuggling, which had eased after India cut tariffs in mid-2024.
“Grey markets are likely to become active, as the incentives to bring in gold illegally are high. At current price levels, smugglers could make significant profits,” said a Mumbai-based bullion dealer at a private bank.
PM MODI'S AUSTERITY APPEAL
PM Modi on Sunday urged Indians to adopt practical austerity measures as the country braces for the economic impact of the ongoing Iran-US conflict and soaring global crude oil prices.
Among the steps suggested by the Prime Minister were avoiding gold purchases for weddings for a year, postponing non-essential foreign travel and reviving work-from-home practices wherever feasible. He also called for greater use of public transport and reduced dependence on imported goods.
PM Modi reiterated the appeal on Monday, with the move aimed at helping both households and the broader economy cope with the effects of a prolonged oil shock, which could fuel inflation and push up costs across sectors.
The remarks came at a time when fuel prices have surged to record highs in several countries, including the US and neighbouring Pakistan, due to the fallout of the Iran war. While Indians have so far been largely shielded from the impact, concerns remain that prices could begin rising in the coming days.
