India Increases Gold and Silver Import Tariffs to Curb Forex Pressure India has raised import tariffs on gold and silver to address growing concerns over forex reserves and inflation, aiming to reduce reliance on foreign currency for these commodities. The move, announced after Prime Minister Narendra Modi’s appeal to citizens to curb non-essential gold purchases and avoid unnecessary foreign travel, comes amid a sharp rise in gold imports and a weakening rupee. Context and Rationale The government increased the import duty on gold from 6% to 15%, with an additional 3% GST, raising the effective rate to 18.45%. For silver, the tariff was raised to 12.5% from 7.5%. Officials cited the need to stabilize the rupee and reduce the current account deficit, as gold imports accounted for 72 billion dollars in fiscal year 2025-26. The decision follows a surge in gold demand, driven by cultural significance in India, where gold is integral to weddings, festivals, and savings. Economic Implications The tariffs are expected to increase domestic prices for gold and silver, though experts debate their effectiveness. Chirag Seth of Metals Focus noted that higher tariffs could deter imports, but Rajesh Rokade of the All India Gems and Jewellery Council argued that the government’s appeal to curb gold purchases has not significantly reduced demand. The move also aims to alleviate pressure on India’s forex reserves, which fell to 690.7 billion dollars by mid-May, the lowest level in over a month. However, analysts warn that high oil prices, a strong dollar, and capital outflows continue to strain the rupee. V Chung of BNW Asia-Pacific Macro Strategy highlighted that while the tariffs may offer limited relief, they cannot fully counteract these broader economic challenges.#india #prime_minister_narendra_modis #rupee #gold_imports #current_account_deficit
PM Modi Urges Indians to Cut Gold Purchases to Save Foreign Exchange Reserves India’s Prime Minister Narendra Modi has called on citizens to reduce unnecessary gold purchases and overseas travel to conserve the country’s foreign exchange reserves. The government has raised the import duty on gold and silver from 6% to 15% to discourage imports, which have surged to record levels. Gold imports reached $71.98 billion in 2025-26, a 24% increase from $58 billion in the previous fiscal year. This spike is attributed to sharply rising global gold prices, which jumped from approximately $76,617 per kg in FY25 to nearly $99,825 per kg in FY26. Modi emphasized that small changes in consumer behavior, such as delaying gold purchases for a year, could lead to significant savings in foreign exchange. The government’s policy aims to redirect resources toward more productive investments, as gold imports contribute to the current account deficit and strain foreign exchange reserves. When India imports gold, it uses dollars, increasing the demand for foreign currency and reducing reserves. This dynamic exacerbates the trade deficit and pressures the rupee’s value against the dollar. India remains the world’s second-largest gold consumer after China, with domestic demand in 2025 reaching 800 tonnes. Approximately 85-90% of this demand is met through imports, as domestic production accounts for only about 1% and recycling contributes 10-11%. The surge in imports has pushed gold’s share of total imports to over 9%, with the sector accounting for $72 billion in 2025-26. This has widened the trade deficit to $333.2 billion in 2025-26 and increased the current account deficit to $13.2 billion, or 1.3% of GDP, in the December quarter. Experts highlight the dual role of gold in India’s economy.#india #prime_minister_narendra_modi #reserve_bank_of_india #gold_imports #current_account_deficit
