Tax Hike and Administrative Blocks Squeeze Precious Metal Supply
India’s monthly gold imports have experienced a sharp decline of approximately 70%, falling from a historical average of 75–100 tonnes per month to just 25–30 tonnes in June 2026. This dramatic contraction follows the central government’s implementation of a customs duty hike and tighter administrative controls aimed at conserving the country’s foreign exchange reserves and stabilizing the rupee amid geopolitical tensions in West Asia.
The primary driver of this decline was the decision on May 13, 2026, to raise the effective import duty on gold and silver from 6% to 15%. This was achieved by raising the basic customs duty to 10% while keeping the Agriculture Infrastructure and Development Cess (AIDC) at 5%. Furthermore, since April 1, 2026, customs authorities have declined to re-notify commercial banks as ‘nominated agencies’ for gold imports. Currently, only three state-run agencies, including MMTC, are authorized to import gold, severely bottlenecking the supply chain.
PM’s Austerity Appeal and Impact of Elevated Global Prices
The policy shift coincided with a direct public appeal from Prime Minister Narendra Modi, urging citizens to avoid purchasing gold for a period of one year to help protect India’s foreign exchange reserves and stabilize the domestic currency. The resulting rise in domestic prices, combined with this appeal, has led to a significant cooling in consumer demand for gold jewellery. However, while import volumes fell by 70%, the monetary value of gold imports remained high due to record-high global gold prices, with May imports rising 34% year-on-year to $3.41 billion.
