Higher Precious Metal Duties to Dampen Demand and Support India’s Rupee

India has increased import tariffs on gold and silver to 15%, rising from a previous rate of 6%, as the government seeks to curb overseas purchases of the metals and alleviate pressure on the country’s foreign exchange reserves.

According to government orders released on May 13, 2026, the new effective import tax is composed of a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC). Reuters reports that these measures are intended to help narrow India’s trade deficit and provide support for the rupee, which has been one of the worst-performing currencies in Asia.

Impact on Precious Metals Demand

As the world’s second-largest consumer of precious metals, India relies on imports to meet nearly all of its gold consumption. Industry officials suggest the higher duties may dampen demand, particularly as prices for gold and silver were already elevated.

Surendra Mehta, national secretary at the India Bullion and Jewellers Association, noted the expected nature of the move to address the current account deficit. He stated: 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 elevated.

The tariff hike follows a public appeal from Prime Minister Narendra Modi on May 11, 2026, during which he urged citizens to avoid gold purchases for one year to help protect the nation’s foreign exchange reserves.

Investment Trends and Market Pressure

The move comes amid a period of increased gold demand for investment purposes, driven by a recent rally in prices and negative returns from equities over the past year.

Data from the World Gold Council, released in April 2026, indicated that inflows into gold exchange-traded funds (ETFs) in India surged 186% year-on-year during the March quarter, reaching a record 20 metric tons.

The government has implemented several measures in recent weeks to restrict imports. This includes the levying of a 3% integrated goods and services tax (IGST) on gold and silver imports, which led banks to halt imports for more than a month. Imports in April fell to a near 30-year low.

Risk of Increased Smuggling

While the tariffs are designed to stabilize the economy, industry officials have warned that the higher import taxes could revive smuggling activities. These activities had previously eased after the Indian government cut tariffs in mid-2024.