Government Hikes Duty on Gold, Silver From 6% to 15% in Bid to Lower Demand

India has sharply increased the import duty on gold and silver from 6% to 15% in a major move aimed at reducing demand for precious metals and protecting the country’s foreign exchange reserves. The decision comes during a period of global uncertainty, rising crude oil prices, geopolitical tensions, and pressure on the Indian rupee. The government believes that reducing gold imports can help control the widening trade deficit and stabilize the economy.

Gold has always held a special place in Indian households—not only as jewellery but also as a trusted form of savings and long-term investment. However, the latest duty hike is expected to make gold and silver significantly more expensive for consumers, jewellers, and investors.

Key Takeaways

• India increased gold and silver import duty from 6% to 15%
• The move aims to reduce imports and support the rupee
• Domestic gold and silver prices are expected to rise
• Jewellery purchases may become more expensive
• Gold remains an important long-term investment option
• Gold ETF and digital gold investment demand may rise
• Wedding jewellery budgets could increase
• Higher duties may revive gold smuggling
• Investors should avoid panic buying
• Silver investment demand may remain strong despite higher prices

Quick Overview of the New Gold and Silver Duty

The government has imposed a 10% Basic Customs Duty along with a 5% Agriculture Infrastructure and Development Cess, taking the effective import tax to 15%.

Why Did the Government Increase Import Duty?

The main objective behind the duty hike is to reduce imports of precious metals and conserve foreign exchange reserves. India imports most of the gold it consumes, and rising imports increase pressure on the economy.

The government also wants to reduce the current account deficit and support the rupee, which has faced pressure due to global economic challenges.

Major Reasons Behind the Decision

• Rising gold and silver imports
• Pressure on India’s foreign exchange reserves
• Weakening rupee against the US dollar
• Increasing crude oil import costs
• Global uncertainty and West Asia tensions
• Need to reduce non-essential imports

Prime Minister Narendra Modi had also appealed to citizens to avoid unnecessary gold purchases for a year due to economic pressures.

How Will This Impact Gold Prices?

The biggest immediate effect of the duty hike is higher domestic gold and silver prices.

When import taxes increase, the landed cost of precious metals rises. Jewellers and bullion dealers usually transfer these additional costs to customers.

Expected Market Impact

What Does This Mean for Gold Investment?

The new policy is likely to affect gold investment trends across India.

Even though prices are rising, gold continues to be viewed as a safe-haven investment during uncertain times. Many investors prefer gold investment options when equity markets become volatile.

Popular Gold Investment Options in 2026

Will Demand for Gold Actually Reduce?

Despite the sharp increase in duties, many experts believe India’s gold demand may not fall drastically.

Gold is deeply connected to Indian culture, festivals, weddings, and family savings. For many households, buying gold is both an emotional decision and a financial investment.

Why Demand May Continue

• Gold is seen as a stable investment
• Weddings and festivals drive regular purchases
• Investors use gold as a hedge against inflation
• Cultural importance remains very strong
• Silver investment demand is also increasing

However, consumers may shift toward:

• Lightweight jewellery
• Lower-carat ornaments
• Recycled gold products
• Digital gold investment platforms

Can Higher Duty Increase Smuggling?

One major concern linked to higher import taxes is the possibility of rising gold smuggling.

Whenever import duties rise sharply, illegal channels become more attractive because smugglers can sell gold at lower prices while avoiding taxes.

• Risks of Increased Smuggling
• Growth in illegal trade
• Loss of government tax revenue
• Market distortion
• Price manipulation
• Reduced transparency in bullion trade

Industry experts have warned that smuggling activities, which had reduced after earlier duty cuts, may rise again.

What About Silver?

Silver has also become more expensive after the new duty hike.

Silver demand in India has grown rapidly because of

• Industrial usage
• Solar energy manufacturing
• Electronics production
• Investment demand

Silver investment has become increasingly popular among young investors due to lower prices compared to gold. However, the new duties are expected to push silver prices higher in the domestic market as well.