Gold Imports and Retail Demand Face Policy Impact
India’s retail and wholesale gold demand has crashed by approximately 70% over the last two weeks, following the government’s decision to increase the basic customs duty on gold imports from 6% to 15%. The tariff hike was implemented by the Ministry of Finance to manage the rising trade deficit and support the domestic currency by checking gold imports.
The import duty increase was immediately reflected in local bullion rates, pushing domestic gold prices to a premium compared to international exchange rates. Retail consumers have postponed purchases, while jewelry manufacturers and wholesalers have suspended raw gold purchases, drawing down on existing inventory. The drop in demand has impacted trade volumes across major jewelry hubs in Mumbai, Chennai, and Delhi.
Jewelry Trade Associations Request Duty Review
Trade bodies, including the All India Gem and Jewellery Domestic Council, have submitted representations to the government, requesting a reduction in the tariff. They argue that high import duties encourage smuggling through unofficial channels, affecting tax revenues. Industry experts suggest that gold imports may remain low until the festive season begins, when consumer demand traditionally rises despite price barriers.
