India's latest gold tariff hike is pushing more trade into the grey market, according to a warning from the World Gold Council this week. The increase, aimed at curbing imports and protecting the rupee, is instead fueling unofficial channels that bypass customs and taxes. The Council says the move undermines official trade data and could destabilize global gold prices.
What the tariff hike does
India raised its import duty on gold to 15% in mid-2026, up from 12.5%. The government hoped to reduce the country's trade deficit and slow rupee depreciation. But the higher levy has made legal imports less competitive, creating a wider gap between official and grey-market prices. Smugglers and unofficial dealers are stepping in to fill demand.
Grey market activity surges
The World Gold Council's report, published this week, notes that unofficial gold inflows have risen sharply since the tariff change. While exact volumes are hard to track, the Council estimates that grey-market imports could now account for a significant share of total consumption. This shift means the government collects less tax revenue and loses visibility over actual gold flows.
Global price risks
Because India is the world's second-largest gold consumer, after China, its market dynamics matter globally. The Council warns that a large, opaque grey market can distort official price benchmarks. If Indian demand shifts unpredictably between legal and illegal channels, it could create sudden price swings in international markets. The report calls for coordinated policy action to address the root causes of the tariff-driven evasion.
What comes next
The Indian government has not signaled any immediate rollback of the tariff. The World Gold Council is urging authorities to consider alternative measures, such as a more gradual duty adjustment or improved enforcement against smuggling. For now, the grey market is likely to keep growing, and global gold traders are watching closely for any signs of price dislocation.
