Government Announces Significant Increase in Gold and Silver Import Duties: Breaking Down the Rationale

Government Announces Hike in Customs Duty on Gold, Silver Amid Rising Crude Oil Prices and Volatility in the Rupee

The Indian government has announced a hike in customs duty on gold, silver, and precious metals in an effort to defend the rupee amid high volatility due to the ongoing war in Iran. The sharp hike in gold and silver duties, now 15% from 6% earlier, comes at a time when the rupee has been pushed to a record low driven by mounting foreign exchange outflows following soaring crude oil prices and disruptions triggered by the closure of the Strait of Hormuz.

The Centre has more than doubled import duties on gold and silver to about 15% from 6%, imposing a 10% basic customs duty alongside a 5% agriculture infrastructure and development levy. Platinum imports will now be taxed at 15.4% from 6.4% earlier. The government has also revised duties on jewellery findings and certain industrial inputs, with gold and silver findings now attracting a 5 per cent duty, and platinum findings set at a rate of 5.4 per cent.

The decision was driven by concerns over rising crude oil prices, pressure on the rupee, and widening external-sector risks linked to the Iran war and disruptions in the Persian Gulf region. India imports nearly $72 billion worth of gold in FY26, making it the country's second-largest import item after crude oil. The war in Iran, which began on February 28, has pushed up the prices of crude sharply due to the disruption in supplies after the country shut down the Strait of Hormuz. Most of India's oil passes through the crucial chokepoint.

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The higher duties have raised domestic prices of gold and silver, and may temporarily slow consumer demand. Gold and silver prices shot up by 6 per cent on MCX on Wednesday following the decision. However, analysts believe purchases linked to weddings and cultural occasions are unlikely to see a major decline.

Economists said the move could help moderate forex outflows and provide some support to the rupee but cautioned that the tariff hike alone may not be enough to ease pressure on the currency if oil prices remain elevated and foreign capital outflows continue. The RBI is steadily intervening to bolster the rupee amid pressures, and the foreign-exchange reserves dropped to $690.7 billion as of May 1, the lowest level in more than a month.