Whalesbook
Imports Resume Amid New Tax
Indian banks have restarted gold and silver imports after a halt that began on April 1, 2026. The pause was due to customs authorities demanding a 3% Integrated Goods and Services Tax (IGST) on shipments. This tax had been effectively waived for importing banks for nearly a decade through annual government orders. When the annual renewal of this exemption did not materialize at the start of India's fiscal year, banks halted shipments, expecting the waiver to be restored.
However, the government signaled its intent to curb gold imports to manage the trade deficit and foreign exchange reserves. This led banks to agree to pay the IGST to ensure supply continuity. This decision comes as the Indian rupee has depreciated, losing approximately 4.1% against the US dollar year-to-date in 2026, following a 5% fall in 2025. The government aims to control foreign currency outflows, which are heavily impacted by gold imports.
Record Low Imports in April
The month-long halt severely impacted import volumes. Gold imports in April 2026 are estimated to have fallen to around 15 metric tons. This figure represents a near 30-year low for the month, excluding pandemic-related disruptions in 2020. This reduction occurred despite the proximity of Akshaya Tritiya, a major gold-buying festival in India. For context, India imported 35 metric tons in April 2025 and averaged about 60 metric tons monthly in the prior fiscal year. The value of gold imports in April 2026 likely totaled $1.3 billion, a significant drop from the previous financial year's monthly average of about $6 billion. The disruption also affected gold dore, the raw material for domestic refiners, as new import license applications were rejected or deferred.
Demand Weakness Persists
While resuming imports helps jewelers with supply, it does not resolve the government's policy objectives. Banks are now absorbing the 3% IGST cost, which could eventually be passed on or widen their cost base, potentially dampening future demand. The government clearly intends to reduce gold imports to support the rupee and narrow the trade deficit, suggesting further measures or sustained pressure on importers. India's strategy appears more direct in curbing non-essential imports compared to other nations managing similar challenges. The trade deficit is expected to widen with resumed imports, adding pressure on foreign exchange reserves and the rupee. Despite improved gold availability, domestic demand remains weak. Gold is trading at discounts in the local market, with dealers offering prices up to $17 per ounce below official domestic rates, even after accounting for import and sales taxes. This disconnect suggests potential issues in domestic consumption or broader economic sentiment struggling to absorb higher costs.
What Happens Next
Volatility is expected for the Indian rupee as the trade deficit widens with resumed gold imports. The return of Indian banks to the global market may support international bullion prices, but the overall impact on India's economic metrics is a concern. The central government is reportedly working to rectify the IGST exemption, suggesting the current arrangement of banks paying the tax may be temporary. Pressure to manage foreign exchange reserves and the trade balance will likely persist, potentially leading to future policy adjustments or scrutiny on import volumes. The outlook for India's precious metals market remains cautious, dependent on macroeconomic stability and trade balance management.