Jewellers and industry leaders have said the Centre’s decision to hike import duty on gold and silver could temporarily impact jewellery volumes, though demand for the yellow metal is expected to remain resilient because of its strong cultural and investment appeal in India.
Industry players also said the move could help conserve foreign exchange reserves, promote recycling of idle domestic gold and strengthen the circular gold economy amid the ongoing West Asia crisis.
The Centre increased import duty on gold and silver on Wednesday, a move aimed at conserving foreign exchange reserves and promoting recycling and circulation of idle domestic gold.
The hike follows Prime Minister Narendra Modi's call for curbs on gold purchases, along with other austerity measures, to reduce avoidable foreign-exchange expenditure.
The total duty, inclusive of agriculture cess and Integrated GST, has nearly doubled to 18.45 per cent to reduce forex drain, sector veteran Pankaj Parekh said.
Senco Gold & Diamonds MD and CEO Suvankar Sen said the elevated duty structure may continue for around a year amid geopolitical uncertainties and high crude oil prices linked to the Middle East crisis.
“The duty would remain high till the Middle East crisis remains, crude oil prices remain high, and the oil supply chain becomes stable,” Sen said.
“The volumes might get impacted by 10-15 per cent, but value-wise it will remain at a higher level. Consumers will buy lighter-weight jewellery,” he added.
Anjali Jewellers Director Annargha Uuttiya Chowdhuury said the government periodically reviews import duties in line with evolving economic priorities, and the latest increase may only have a limited impact on consumers.
“Gold in India continues to hold strong emotional, cultural, and investment value. Consumers planning fresh purchases are likely to maintain demand, particularly during weddings and festive occasions, viewing gold not only as an adornment but also as a long-term financial asset,” he said.
Chowdhuury added that higher duties may encourage organised gold recycling and strengthen the domestic circular gold economy, as a substantial portion of demand is already met through exchange and reuse of old gold.
Industry players also backed Modi’s appeal to conserve foreign exchange reserves by reducing dependence on imported gold.
Kalyan Jewellers India Ltd said it has launched the ‘Nation First – Gold4India Initiative’ in response to the Prime Minister’s appeal and aims to reduce gold imports by 5 tonnes during the current financial year by encouraging the circulation of idle domestic gold.
Kalyan Jewellers Managing Director T.S. Kalyanaraman said a stronger domestic recirculation ecosystem could sustain employment in the jewellery sector and help states preserve GST revenues from organised trade.
“The initiative will strive to spark a behavioural shift in consumers, from viewing gold solely as a static asset preserved indefinitely, to recognising it as a renewable domestic resource capable of continuously generating economic value within the country,” he said.
Malabar Group Chairman M.P. Ahammad said the government’s move should be viewed in the context of strengthening India’s economic resilience and encouraging responsible use of domestic gold resources.
He said while higher duties may make consumers more value-conscious in the near term, demand linked to weddings, savings and cultural occasions would remain fundamentally strong.
Ahammad said exchange of old gold for new jewellery is likely to emerge as the dominant mode of purchase over the coming quarters, easing pressure on fresh imports without affecting consumer aspirations.
He also reiterated the group’s proposal to strengthen the Gold Monetisation Scheme by making it easier and more rewarding for households to deposit idle gold and by integrating organised jewellers into the scheme’s customer-facing network.
Gold prices soared by Rs 8,550 to a little over Rs 1.65 lakh per 10 grams on Wednesday after the government increased the import duty on precious metals to 15 per cent, whereas, silver prices jumped by Rs 20,500 to Rs 2,97,500 per kg in Delhi markets from Rs 2,77,000 per kg (inclusive of all taxes) on the previous day, according to the All India Sarafa Association.
Local traders said the actual impact of the higher levy would play out over the coming days once the increased duty begins reflecting in purchase bills.
“The recent hike in India's gold import duty is likely to raise local prices and temporarily dampen physical demand. However, investors should not view this as a reason to panic. Gold continues to hold its appeal as a safe-haven asset, particularly in times of global uncertainty and domestic currency pressures,” Hareesh V, Head of Commodity Research, Geojit Investments Ltd, said.
India is the world's second-largest consumer of precious metals, and prices have rallied in recent months amid an unabated rise in demand, including for investment purposes. Gold is India's second-largest commodity import after crude oil, and rising purchases have added to foreign-exchange outflows, pressuring the rupee to record lows.