Whalesbook
India Gold Imports Tumble to 30-Year Low on Tax Dispute and Delays
Gold imports into India plunged in April to an estimated 15 metric tons, the lowest volume for the month in nearly three decades. This marks a steep drop from the 35 tons imported in April 2025 and falls short of the monthly average of around 60 tons from the 2025-26 fiscal year. The decline stems from customs authorities demanding a 3% integrated goods and services tax (IGST) from banks, a levy previously not applied to their imports since the system's 2017 adoption.
Banks, which handle most of India's refined gold imports, have suspended shipments due to the unexpected tax demand and delays in official import authorization. Around 8 tons of gold are currently stuck in vaults awaiting customs clearance. This bottleneck coincides with Akshaya Tritiya, a major gold-buying festival. Jewellers and dealers had imported gold expecting high demand, but this stock is now idle. The shortage has pushed domestic gold premiums to $15 per ounce. Many jewellers are struggling to find alternative supplies, with volumes through the India International Bullion Exchange (IIBX) remaining modest.
These import curbs and administrative delays appear aimed at reducing gold imports. The government's focus is on narrowing India's trade deficit and supporting the Indian rupee, which has seen significant pressure. India's trade deficit, partly fueled by gold and oil imports, has been a key concern, with the rupee hitting record lows against the US dollar on April 30, 2026.
The sharp reduction in Indian demand could also lower global gold prices, given India's status as the world's second-largest consumer. Imports of gold dore, a semi-pure alloy for refining, have also faced issues with rejected or deferred license applications.
The current import halt highlights India's dependence on foreign gold. Although 17 banks were authorized for bullion import from April 1, 2026, the official notification arrived late on April 17. The government's actions, aimed at managing the trade deficit and currency, introduce short-term risks to the domestic market, including potential price swings and a rise in informal trade. Historically, efforts to restrict gold imports have led to higher local premiums and unofficial channels.
While cultural factors ensure strong underlying gold demand, current supply disruptions are causing temporary price pressures and impacting jewellers' operations. The situation's resolution depends on clearing the IGST dispute and administrative hurdles. Any continued import slowdown could further weigh on the rupee and India's trade balance.