India Raises Gold Import Duties Amid Rupee Pressure

CNBC reported Wednesday that India has more than doubled import duties on gold and silver to 15%, up from 6%. The move combines a 10% basic customs levy with an additional 5% tax on bullion shipments. It comes just days after Prime Minister Narendra Modi publicly asked citizens to stop buying gold overseas for one year.

Gold Demand Surged to Record Levels

India’s appetite for bullion has expanded sharply in 2026. Average monthly gold imports climbed to 83 tonnes in the January-February period, compared with roughly 53 tonnes per month across 2025, according to a World Gold Council report. In value terms, first-quarter gold demand nearly doubled year on year, reaching a record $25 billion. Investment demand now accounts for 40-45% of total consumption, up from the 30-35% range seen previously.

That surge has directly pressured India’s import bill, widening the merchandise trade deficit to more than $330 billion for the fiscal year ending March 2026. That compares with a $280 billion deficit one year earlier. Gold and silver together represent roughly 11% of total imports.

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Energy Crisis Adds to Rupee Strain

Bullion is only part of the problem. India imports roughly 85% of its fuel needs and leaned on the Strait of Hormuz for around half its crude oil before conflict escalated in the region. Higher global energy prices have pushed petroleum products, already at 22% of total imports, even higher. The combined weight of fuel and gold on the current account has dragged the rupee to record lows against the dollar.

Vishrut Rana, Asia-Pacific economist at S&P Global Ratings, told CNBC that curbing gold imports could reduce current account outflows meaningfully. He cautioned, however, that elevated energy costs remain the dominant pressure and that rupee weakness is unlikely to ease until that dynamic shifts.

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Economists Warn on Policy Reversal

Not everyone is convinced the tariff hike sends the right signal. Trinh Nguyen, a senior economist at Natixis, told CNBC the move represents a step back from the market liberalization that has attracted foreign investors to India. Rather than allowing higher fuel prices to curb domestic consumption naturally, the government is instead reaching for trade barriers and urging behavioral changes such as carpooling and working from home. Modi made exactly that appeal on Monday, joining several other Asian governments pushing citizens to cut fuel use as Middle East tensions keep energy costs elevated. Analysts warn that protecting consumers from pump-price increases while raising import duties risks distorting the economy further.

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