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India’s sharp increase in gold import duties has so far failed to meaningfully dent demand for the precious metal, highlighting the limits of tariff-based measures in a market where gold serves as a cultural asset, investment vehicle and store of wealth.
Data released by the Commerce Ministry showed that gold imports continued to rise strongly even after the government increased the effective import duty on gold from 6% to 15% on May 13, reversing a key tax cut announced in the July 2024 Union Budget.
The duty hike was introduced as part of a broader effort to contain the trade deficit, conserve foreign exchange reserves and support the rupee amid an energy-price shock triggered by the ongoing conflict in West Asia.
Yet the latest figures suggest that India’s appetite for gold remains largely intact.
According to an analysis by the Global Trade Research Initiative (GTRI), gold imports rose 24.1% to $72 billion in fiscal year 2025-26 from $58 billion a year earlier. In April 2026, before the higher duties took effect, imports surged 81.7% year-on-year to $5.63 billion from $3.10 billion. Even after the tariff increase, imports in May climbed 34% to $3.42 billion from $2.55 billion in the same month last year.
Combined imports during April and May reached $9.04 billion, up 60.1% from $5.65 billion in the corresponding period of 2025.
“The latest figures suggest that while the May 13 duty increase moderated the pace of growth, it has not materially reduced India’s demand for gold,” GTRI founder Ajay Srivastava said in the report.
Under the revised tax structure, the Basic Customs Duty was increased from 5% to 10%, while the Agriculture Infrastructure and Development Cess was raised from 1% to 5%. Together with the 3% Integrated Goods and Services Tax levied on the landed value plus duties, the total effective tax burden on imported gold now stands at approximately 18.4%.
Despite the steep increase, import demand has remained resilient, raising questions about whether higher tariffs alone can achieve the government’s external-sector objectives.
A Structural Demand Story
Economists say India’s gold demand is driven by forces that extend beyond price considerations.
Jewelry consumption remains robust, particularly during weddings and festivals. At the same time, investors have increasingly turned to gold as a safe-haven asset amid geopolitical uncertainty, volatile financial markets and concerns about inflation.
Another factor is the sharp rise in international gold prices. Higher prices inflate the value of imports even when volumes remain stable, making import bills appear larger.
Srivastava noted that the resilience of demand reflects a combination of strong jewelry purchases, investment demand and elevated global prices, suggesting that tariffs may only slow, rather than reverse, import growth.
The experience also revives a longstanding debate in India’s trade policy circles. Historically, repeated increases in gold duties have often led to higher smuggling activity and shifts in sourcing patterns rather than sustained reductions in demand.
Country-wise import data for May are yet to be released. Analysts will be watching closely to see whether sourcing has shifted among major suppliers such as the UAE, Switzerland and South Africa following the duty increase.
Global Gold Rush Adds to Demand
India’s continued appetite for gold is unfolding against the backdrop of an unprecedented global accumulation of the metal by central banks.
According to the World Gold Council’s 2026 Central Bank Gold Reserves Survey, 95% of central banks expect global official gold holdings to increase over the next 12 months, the highest level recorded in the survey’s history. Nearly half of respondents expect their own institutions to add to gold reserves during the coming year.
Central banks cited gold’s performance during crises, its role as a long-term store of value, portfolio diversification benefits and protection against geopolitical risks as the primary reasons for increasing allocations. Concerns about trade conflicts, rising sovereign debt levels and growing uncertainty in the international monetary system were also identified as major drivers of purchases.
The survey found that gold now accounts for about 26% of global reserve assets, and a large majority of central banks expect that share to rise further over the next five years. Many respondents also expect the U.S. dollar’s share of global reserves to gradually decline, while gold’s importance increases.
These trends are helping reinforce investor confidence in gold globally, contributing to elevated prices and sustaining demand across major consuming countries, including India.
Implications for India
For policymakers, the persistence of strong gold imports presents a challenge.
Gold remains one of India’s largest import categories and contributes significantly to merchandise trade deficits. Every additional billion dollars spent on gold imports increases pressure on the current account and results in foreign exchange outflows.
The government had hoped that restoring higher duties would reduce non-essential imports and ease pressure on the external sector. However, the latest trade data suggest that the relationship between tariffs and demand may be weaker than anticipated.
Analysts say a lasting reduction in gold imports may require broader structural measures, including expansion of gold monetization programs, development of alternative savings instruments, deeper financial inclusion and greater adoption of financial gold products such as exchange-traded funds.
For now, the numbers suggest that India’s centuries-old affinity for gold continues to outweigh tariff disincentives. While the higher duties have moderated the pace of import growth, they have yet to fundamentally alter consumption patterns, leaving policymakers with the difficult task of balancing trade management objectives against one of the country’s most deeply entrenched investment preferences.
