Higher Bullion Duty: Pressure on Jewellery Sector, Relief for Economy

The Indian government has raised import duty on gold and silver from 6% to 15%, including 10% Basic Customs Duty (BCD) and 5% Agriculture Infrastructure & Development Cess (AIDC). The move is aimed at reducing India’s heavy dependence on bullion imports and protecting the economy from rising external pressures. India imported nearly $72 billion worth of gold in FY2025-26, making bullion one of the country’s largest import expenses after crude oil. With gold imports putting pressure on foreign exchange reserves and the rupee, the government is trying to curb excessive demand and reduce the current account deficit (CAD). The immediate impact is visible in the jewellery sector. Companies like Titan Company, Kalyan Jewellers, and Senco Gold may face short-term pressure as higher bullion costs increase jewellery prices and weaken consumer demand. Gold prices reportedly jumped nearly 6–7% after the announcement, raising concerns over slower festive and wedding sales. Consumers are likely to feel the biggest impact. Earlier, imported gold worth ₹1 lakh attracted roughly ₹6,000 duty; now the tax burden rises to nearly ₹15,000. This could push buyers toward lighter jewellery, exchange schemes, or recycled gold purchases. However, the government’s broader objective goes beyond revenue collection. Policymakers want to channel household savings away from physical gold and toward financial assets such as mutual funds, deposits, and bonds. Lower gold imports also mean reduced dollar outflow, which can help stabilise the rupee during global uncertainty. While the short-term outlook may remain challenging for jewellery stocks and retail demand, organised jewellery brands could benefit over time as stricter regulations weaken informal trade. The success of the policy will ultimately depend on whether it reduces imports without significantly hurting domestic consumption or encouraging smuggling.