India raised the import duty on gold and silver to 15% from 6% effective midnight May 12, combining a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess. The move reverses a July 2024 cut that had brought the effective rate down from 15% — a shift aimed at cooling a surge in gold imports that widened the country's trade deficit to $330 billion in fiscal year 2026.
Modi's televised appeal
Prime Minister Narendra Modi went on national television Sunday to ask Indians to stop buying gold for a year. He also urged them to cut fuel consumption and revive remote work arrangements, citing economic strains from the Iran conflict and the disruption of shipping through the Hormuz Strait. Modi framed the request as a patriotic sacrifice to protect the national balance of payments.
The appeal landed hard on Indian jewelry stocks. Titan, Senco Gold, and Kalyan Jewellers all posted losses on Monday after Modi's remarks hit trading screens.
The trade deficit and the rupee
Gold and silver accounted for nearly 11% of India's total imports in fiscal 2026. Monthly gold imports averaged 83 tonnes in January and February, well above the 2025 monthly average of 53 tonnes, according to the World Gold Council. Total gold demand in the first quarter of 2026 rose 10% year-on-year to 151 tonnes, while the value surged 99% to a record 2,275 billion rupees ($25 billion). Investment demand drove the increase, with 82 tonnes going into bars and coins, while jewelry demand slipped to 66 tonnes.
The rupee slid to a fresh all-time low of 95.7375 against the U.S. dollar on Monday. It's now the worst-performing major Asian currency in 2026, shedding nearly 5% since February 28.
Why the duty was rolled back
India is the world's second-largest gold consumer after China and depends almost entirely on imports because its own mining output is tiny. The July 2024 duty cut had been intended to legalize bullion inflows and curb smuggling, but it also unleashed a buying spree that worsened the current account deficit. With the Iran war driving up energy costs and Hormuz chokepoint risks threatening supply lines, the government moved to rein in spending on non-essential imports.
The 15% rate is the same level that was in place before the 2024 reduction. The new levy includes a 5% Agriculture Infrastructure and Development Cess, which the government says will fund farm projects.
What happens next
Jewelers and bullion dealers are now waiting to see whether Modi's appeal will actually pull down demand — or if the higher duty simply pushes buyers toward informal channels. The World Gold Council's data showed that investment demand, not jewelry, drove the first-quarter surge, suggesting that Indians may treat the price jump as a buying opportunity rather than a deterrent. The government hasn't announced any enforcement mechanism for the year-long pause the prime minister requested. Traders will be watching the next monthly import figures for a sign of whether the message — or the duty — bites.
