Kamal Ghorui
NEW DELHI: The government on Wednesday raised import duties on gold and silver to 15% from 6% as part of a broader effort to curb rising imports of precious metals and conserve foreign exchange amid mounting pressure from the West Asia crisis.In a notification issued by the finance ministry, the government increased the social welfare surcharge (SWS) and the agriculture infrastructure and development cess (AIDC), pushing the effective customs duty on gold and silver from 6% to 15% from May 13. Import duty on platinum has also been raised from 6.4% to 15.4%. The government has also made corresponding changes in duties on related products, including gold and silver dore, coins and jewellery findings.The move comes days after Prime Minister Narendra Modi urged citizens to postpone gold purchases and reduce non-essential imports to help ease pressure on India’s foreign exchange reserves.Earlier on Sunday, PM Modi appealed to citizens to adopt austerity measures to help conserve foreign exchange during the crisis. He called for “judicious use of fuel” and advised people to postpone gold purchases and foreign travel wherever possible.The PM also suggested reducing petrol and diesel consumption, increasing the use of metro rail services, carpooling, electric vehicles and railway transport to reduce pressure on imports.
Why the government raised import duty
The government has increased import duty on gold and silver to 15% as India faces rising pressure on its foreign exchange reserves due to the ongoing West Asia conflict, soaring crude oil prices and disruption in the Strait of Hormuz.Sources told PTI that the move is aimed at reducing “discretionary imports” like gold and prioritising foreign exchange for essential imports such as crude oil, fertilisers, industrial raw materials, defence equipment and capital goods that directly support economic activity and food security.According to sources, the government wants to “prudently manage emerging risks and reduce vulnerability to potential external shocks before pressures on current account intensify further” amid “extraordinary” global conditions.
Rupee under pressure
The Indian rupee has come under severe pressure due to rising import costs and geopolitical tensions. The currency hit a record low of 95.63 against the US dollar on Tuesday as crude oil prices surged amid fears of supply disruption in West Asia.Higher imports mean India has to spend more dollars, which weakens the rupee further and increases pressure on the current account deficit (CAD).Earlier on Tuesday, chief economic advisor V Anantha Nageswaran described the ongoing West Asia crisis as a “live balance of payments stress test”, warning that it has direct implications for inflation, the current account deficit and the exchange rate.Also read: PM Modi wants Indians to cut gold buying: How much forex can be saved?
Forex reserves declining
India’s foreign exchange reserves have fallen sharply since the outbreak of the West Asia conflict. RBI data showed reserves declined to $690 billion in the week ended May 1 from a record $728.49 billion in February.Foreign currency assets (FCAs), the biggest component of forex reserves, dropped to $551.8 billion, while gold reserves also fell to $115 billion.Sources told PTI that, “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.”Officials added that during periods of global uncertainty, moderating non-essential imports can help maintain macroeconomic stability and reduce pressure on external accounts.
Gold imports adding to the burden
India is the world’s second-largest gold consumer after China and depends heavily on imports to meet domestic demand. Since gold imports are paid for in US dollars, they increase demand for foreign currency and widen the trade deficit.India’s gold imports surged over 24% to a record USD 71.98 billion in 2025-26 despite a fall in import volumes. The sharp rise was driven largely by soaring global prices, with gold prices rising from USD 76,617.48 per kg in FY25 to USD 99,825.38 per kg in FY26.Sources said precious metals are “predominantly consumption and investment driven in nature” and involve a “substantial outflow of foreign exchange”.“Therefore, during periods of external stress, measured moderation of discretionary imports may contribute significantly to overall macro-economic stability and prudent external-sector management,” a source said.
Oil shock and Hormuz disruption
The duty hike also comes as India’s oil import bill rises sharply due to the conflict in West Asia and disruption in the Strait of Hormuz, a critical global energy shipping route.Brent crude prices have jumped from around USD 73 per barrel before the conflict to nearly USD 107 per barrel. Prices had briefly touched USD 126 per barrel in April.India imports nearly 87% of its crude oil requirement, and about 46% of those shipments move through or near the Strait of Hormuz. The country also imports around 60% of its LPG requirement, with over 90% coming via the Gulf region.
How the duty hike will affect gold prices
The increase in import duty is expected to push domestic gold and silver prices even higher at a time when both metals are already trading near record levels.Since India depends heavily on imported gold, higher customs duties directly increase the landed cost of the metal. Jewellers are expected to pass on the additional burden to consumers, making jewellery and bullion more expensive.Following the announcement, gold and silver prices surged sharply on the Multi Commodity Exchange (MCX). Around 9.59 am, gold was trading at Rs 1,63,000 while silver touched Rs 2,96,600, with both rising more than 6%.In the national capital, gold prices climbed Rs 1,500, or nearly 1%, to Rs 1,56,800 per 10 grams, while silver prices jumped Rs 12,000, or 4.53%, to Rs 2,77,000 per kg.The move effectively reverses the government’s 2024-25 Budget decision to cut customs duty on gold from 15% to 6% to support the gems and jewellery industry, reduce smuggling and lower domestic prices.India had previously raised gold import duty to 15% in 2022 as well, when the Russia-Ukraine war triggered a spike in oil prices and weakened the rupee.
