India Raises Gold and Silver Import Duties to Defend Rupee

The Indian government has increased import duties on gold and silver to 15%, raising the tariffs from a previous rate of 6% in an effort to stabilize the rupee and reduce the country’s import bill. According to government notifications issued on May 13, 2026, the new tariff structure consists of a 10% basic customs duty and a 5% tax on gold and silver imports.

The policy shift follows a public appeal by Prime Minister Narendra Modi, who urged Indian citizens to pause the purchase of gold for one year. The Prime Minister noted that overseas purchases of bullion are placing significant pressure on the rupee, which has fallen to record lows in recent days.

India is currently the world’s second-largest consumer of gold. The decision to more than double the import tariffs comes as the government attempts to arrest the slide of the national currency amidst broader macroeconomic pressures and geopolitical instability.

The pressure on India’s foreign exchange and currency is being compounded by rising global energy prices. The government has linked the increase in the national import bill to higher energy costs resulting from the Iran conflict and general disruptions in the Middle East.

As a net importer of goods, India has seen its merchandise trade deficit expand significantly. In the financial year that ended on March 31, 2026, the country ran a merchandise trade deficit of more than $330 billion, an increase from the more than $280 billion deficit recorded in the previous year.

The composition of India’s imports highlights the scale of its reliance on external energy and bullion markets. Crude oil and petroleum products account for 22% of India’s total imports, while gold and silver combined represent nearly 11%.

Data from a World Gold Council report released in April 2026 indicates a sharp rise in the volume of bullion entering the country. India’s average monthly gold imports rose to 83 tonnes during the first two months of 2026, compared to an average of 53 tonnes throughout 2025.

The World Gold Council attributed this surge primarily to strong investment demand during January 2026. In terms of total value, gold demand in India nearly doubled year on year during the first quarter of 2026, reaching a record of $25 billion.

The sudden spike in investment demand has contributed to the inflation of the import bill, making the currency more vulnerable to external shocks. By raising the cost of importing gold and silver, the government intends to curb this demand and reduce the outflow of foreign currency.

The timing of the tariff hike reflects the urgency of the currency crisis. The rupee’s descent to record lows has forced the administration to employ restrictive trade measures to protect the economy from further volatility caused by the combined effects of high energy prices and high bullion demand.

The government’s strategy involves a two-pronged approach: using fiscal policy through the 15% tariff to make imports more expensive and using public messaging via the Prime Minister to discourage domestic consumption of gold for the next twelve months.

The impact of these measures on the gold market will be closely monitored as the government seeks to balance the cultural and investment demand for bullion with the necessity of maintaining a stable exchange rate and a manageable trade deficit.