India has raised import duties on gold and silver to around 15 percent, more than double the previous 6 percent rate, in a bid to stem the depreciation of the rupee and protect foreign‑exchange reserves that have been pressured by the conflict in the Middle East.
Gold and silver purchases are settled in U.S. dollars, meaning that higher duties compel importers to draw on the nation’s foreign‑currency reserves or to convert rupees into dollars. Prime Minister Narendra Modi has already urged citizens to curb personal gold buying for a year, warning that the rupee’s slide against the dollar has intensified since the outbreak of hostilities in the region.
The duty increase was announced through two official orders released late on Tuesday. It comes as India faces a twin shock: a tightening of global oil supplies after the closure of the Strait of Hormuz—through which roughly one‑fifth of the world’s crude passes—and soaring petroleum prices that have inflated the country’s import bill.
India, the world’s third‑largest oil importer, has seen its foreign‑exchange reserves dip as higher crude costs strain the balance of payments. In response, Modi appealed on Sunday for reduced consumption of petrol and diesel, highlighting the need to conserve dwindling reserves.
Gold, long regarded as a store of wealth and a staple of Indian weddings and festivals, ranks second only to crude oil among the nation’s imports. By making gold and silver more expensive to bring into the country, the government hopes to temper demand, thereby limiting outflows of dollars. Analysts note that the policy could also reinforce the rupee by dampening speculative buying and encouraging domestic savings in other assets.
The move aligns with broader efforts to stabilize the currency amid a volatile external environment. While higher duties will raise prices for retailers and consumers, the government expects the revenue boost and reduced import pressure to outweigh the short‑term cost to buyers.
Market observers will watch how quickly the higher tariffs translate into lower gold imports and whether the rupee stabilises in the weeks ahead. Continued volatility in Middle‑East oil supplies could still pose challenges to India’s foreign‑exchange position, making the effectiveness of the duty hike a key indicator of the country’s fiscal resilience.
If the policy curbs gold demand as intended, it may provide the rupee with a modest floor and alleviate some pressure on reserves, buying the government time to address longer‑term structural issues in the energy sector and foreign‑currency management. Future adjustments could follow depending on the trajectory of oil prices and the evolution of the geopolitical situation.
