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India sharply increased import duties on gold and silver to curb demand for precious metals and reduce pressure on foreign exchange reserves. The decision could make gold more expensive for Indian buyers and affect the global market, where India remains one of the largest consumers.
On May 13, the Indian government increased the effective import duty on gold and silver from 6% to 15%. According to Moneylife, the new structure includes a 10% basic fee and a 5% fee for the development of agricultural infrastructure. For platinum, the rate increased from 6.4% to 15.4%.
The decision was taken against the background of pressure on the rupee, the trade balance and foreign exchange reserves of India. The WSJ writes that the increase in duties occurred after Prime Minister Narendra Modi called on citizens to cut spending on fuel, foreign travel and gold to support the economy amid the Middle East crisis.
For India, gold is not only an investment asset, but also an important part of consumer culture, particularly during the wedding season. That is why an increase in duty can quickly pass into prices for buyers of jewelry, reduce demand and hit local jewelry companies.
According to the Times of India, the authorities want to reduce the import of precious metals, reduce pressure on currency reserves and support the rupee. The publication also cites the assessment of the Global Trade Research Initiative, according to which the import of gold bars to India increased from $36.5 billion in 2022 to $58.9 billion in 2025.
The increase in duties can have a double effect. On the one hand, it can reduce official imports and partially support the balance of payments. Secondly, the increase in the price of legal gold imports may again increase the risk of smuggling, which India tried to reduce with the previous reduction in duties.
It is important for the world market that India is one of the largest buyers of gold after China. If domestic demand in India weakens, this may limit some of the physical demand for the metal. But at the same time, the very reason for the decision - the weakness of the currency, geopolitical risks and tension on the energy market - supports investors' interest in gold as a protective asset.
For the Ukrainian reader, this topic is important because of the global context. Precious metals react to the same factors that affect currency markets, oil, inflation and investor sentiment: war in the Middle East, risks to trade, weakness of individual currencies and demand for defensive assets. Therefore, India's decision is not a local tax change, but a signal of how large economies are trying to protect currency reserves in a period of instability.
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