Whalesbook
India Tightens Silver Imports
India's government is taking a tougher approach to precious metals imports. Key silver categories are moving from "free" to "restricted" status, meaning they now need government approval and oversight from the Reserve Bank of India (RBI). These changes are part of a larger effort to better manage the country's spending on imports, which has grown amid global price increases and geopolitical issues.
Duty Hike Targets Imports, Supports Rupee
Import duties on gold and silver have doubled, jumping from 6% to 15%. This sharp increase aims to reduce incoming shipments and help the Indian rupee, which has been weak. In the fiscal year 2025-26, India imported a record $71.98 billion in gold and $12 billion in silver. This contributed to a large trade deficit of $333.2 billion. Gold prices also rose sharply during this time, from about $76,617 per kilogram in FY25 to nearly $99,825 per kilogram in FY26, increasing the cost of imports even as volumes decreased.
Higher Duties Risk Boosting Smuggling, Grey Markets
Industry groups, like the All India Gems and Jewellery Council, are worried. They point out that such high duties have historically not stopped demand but have instead driven up prices and, more importantly, revived illegal trade. After duties were lowered in mid-2024, smuggling decreased significantly. The current duty increase, however, could make grey market operators an estimated 18% profit, up from around 9%. This higher profit margin may encourage smuggling to return, a problem that saw 156.1 tonnes in 2023 before dropping to 20.4 tonnes in 2025. This could reduce government revenue and create an unofficial economy.
Cultural Demand Resists Policy Changes
India's desire for gold and silver is deeply ingrained in its culture, used as a store of wealth, an investment, and for celebrations. This demand is not easily swayed by price hikes or import limits. Experts believe consumers will pay more or find unofficial sources instead of skipping purchases, especially when legal imports become too costly. While the RBI and the Directorate General of Foreign Trade (DGFT) oversee imports through authorized banks, this can create administrative hurdles. Specific rules for silver jewellery imports, requiring licenses and approvals, may cause delays for businesses.
Demand Resilience Expected to Outlast Policy
Despite government efforts, the underlying reasons for India's demand for precious metals remain strong. India is the world's second-largest gold consumer and a major silver user, making its import trends important globally. Even with global silver supply deficits, India's policies are focused on short-term financial needs. The government is using price increases rather than strict limits, hoping to keep markets flexible. However, past experience suggests these policies won't change long-term demand. Instead, they are more likely to shift trade to unofficial channels and raise domestic prices. History suggests it's unlikely fiscal policy can overcome India's cultural and investment drive for gold and silver.