Gold Price India: 9% import duty hike may only offset one month of imports — Here’s why

India’s government increased the import duty on gold from 6% to 15%—comprising a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess—to curb domestic consumption, which stands at over 700 tonnes annually. The price of gold in India initially surged by 6% to Rs 1,62,000 per 10 grams on May 13 before stabilizing the following day, reflecting a mechanical adjustment rather than a fundamental market shift, according to Anindya Banerjee of Kotak Securities. Analysts suggest the 9% duty hike will suppress annual gold demand by approximately 57 tonnes, roughly equivalent to one month’s imports. Dr. Renisha Chainani of Augmont noted that each 1% increase in duty reduces demand by about 6.4 tonnes, based on World Gold Council data. Despite the rise, India’s gold imports remain high, with 151 tonnes consumed in the January-March 2026 quarter, valued at a record $25 billion—a 99% increase year-on-year. The government’s decision stems from concerns over India’s widening current account deficit, exacerbated by rising oil prices amid geopolitical tensions. Foreign exchange reserves dropped by $7.7 billion in a week, falling to $690.69 billion by May 1, while the Indian rupee has depreciated 12% against the dollar in the past year. Vishal Trehan of Aikyam Capital Group warned that high gold and oil imports worsen inflation, currency weakness, and foreign portfolio outflows. India imported over 800 tonnes of gold in 2024, up 5% from 2023, despite a slight decline in 2025. The duty hike is intended to mitigate pressure on forex reserves, but its long-term effectiveness remains uncertain. Analysts emphasize that gold prices in India will continue to align with international LBMA spot prices and the USD/INR exchange rate, making the duty a fixed cost rather than a lasting deterrent.