India Hikes Gold Import Duty to 15%: Why PM Modi Wants You to Stop Buying Gold

In a decisive move following Prime Minister Narendra Modi’s address to the nation, the Indian government has announced a significant hike in the import duty on gold and silver.

This policy shift represents the administration’s first major economic manoeuvre post-speech, aimed at stabilizing the domestic economy amidst geopolitical volatility. 

The New Tax Structure: Gold & Silver

The effective import duty on gold and silver has been raised from 6% to 15%. This sharp increase is designed to curb the surging demand for precious metals, which has put immense pressure on India’s foreign exchange reserves. 

The new tax structure is broken down as follows:

• 10% Basic Customs Duty (BCD): The core tariff applied to overseas purchases. 
• 5% Agriculture Infrastructure & Development Cess (AIDC): An additional levy focused on domestic development.

By making imports more expensive, the government hopes to fix the trade imbalance and provide a much-needed safety net for the Indian Rupee, currently struggling as one of Asia’s weakest-performing currencies. 

Why Did PM Modi Ask Indians to Stop Buying Gold?

The Prime Minister’s appeal to refrain from buying gold for a year was a calculated economic plea. The primary driver behind this request is the ongoing conflict in the Middle East, which has triggered a ripple effect across global supply chains: 

• Fuel & Energy: Disruptions in shipping routes like the Strait of Hormuz increase crude oil prices. 
• Agriculture: Higher fuel costs and disrupted shipping routes lead to more expensive fertilizers. 
• Food Inflation: Since fertilizer is needed to grow food and fuel is needed to transport it, global food prices naturally climb.

The government is currently shielding the public by subsidizing fertilizers and absorbing the rising costs of petrol and diesel.

In exchange, the PM suggested that citizens do their part by cutting back on non-essential imports—specifically gold, imported edible oil and personal vehicle use— all of which drain foreign exchange.

How Gold Weakens the Rupee

While gold is a "safe haven" for personal savings, it functions differently on a national scale. Because India imports most of its gold, these purchases have to be paid for in US Dollars rather than Rupees.

When domestic demand for gold spikes, the demand for the Dollar rises proportionally. As the market dumps Rupees to court the Dollar, the value of the Rupee tumbles.

This depreciation makes essential imports—like the ~80% of crude oil India requires—significantly more expensive. Essentially, buying "unproductive" gold makes essential goods like petrol and groceries more costly for everyone. 

Economic Pressure: Analysing the CAD

The urgency of this hike is backed by recent data. India’s current account deficit (CAD)—the gap between what we spend on imports versus what we earn from exports—widened to $13.2 billion (1.3% of GDP) in Q3 FY26 from $11.3 billion year-on-year. 

Gold is India’s second-largest imported commodity in value terms ($58.01 billion in FY2025), after crude petroleum and other mineral fuels. Thus, the gold import bill has a large bearing on the current account position of the country.

In FY 2025-26 alone, gold imports jumped 24% to hit an all-time high of $71.98 billion. Unlike importing machinery (which builds factories) or oil (which powers transport), importing gold sends massive amounts of US Dollars out of the country without increasing industrial productivity.

Turning Idle Gold into Economic Power

The government's goal isn’t to stop Indian from owning gold, but to focus on cutting back on unnecessary imports during this critical economic phase. The strategy is to shift our focus from importing new bullion to recycling and monetizing the massive reserves already within our borders. 

There is an estimated 24,000 tonnes of gold sitting in Indian households. By utilizing the gold that's already part of households, we can reduce dependence on foreign bullion and lessen unnecessary dollar outflows.

This collective approach is not only about protecting the rupee but also easing the pressure on foreign exchange reserves, helping to shield the national economy from global shocks.

Why Are Gold & Silver Prices Rising Today?

Following the "midnight" announcement, gold and silver prices skyrocketed as markets opened on May 13, 2026, as traders immediately factored in the new 15% effective duty.

Gold, Silver Rates Today: Gold briefly crossed ₹1.64 lakh per 10 grams and silver touched ₹3 lakh per kg before some profit-booking emerged.

Since India is a major importer, the "landed cost" of these metals is dictated by international rates plus local taxes. When the duty jumped from 6% to 15%, banks and importers passed that cost directly to the domestic market.

Consequently, existing inventory was instantly repriced upward, as jewelers and bullion dealers adjusted their rates to match the new replacement cost and maintain profitability.

Related Article: Best Ways to Invest in Gold in India

Frequently Asked Questions (FAQs)

Q: Why has the Indian government increased the gold import duty to 15%?

The government raised the duty to 15% (comprising a 10% Basic Customs Duty and 5% AIDC) to reduce the high volume of gold imports. This is a strategic move to lower the demand for US Dollars, stabilize the Indian Rupee and narrow the widening trade deficit.

Q: How does buying gold affect the value of the Indian Rupee?

Since India imports most of its gold, these purchases must be paid for in US Dollars. High gold demand forces the market to exchange Rupees for Dollars; this increased demand for the Dollar causes the Rupee’s value to drop, making essential imports like crude oil more expensive for everyone.

Q: What was PM Modi’s specific appeal regarding gold purchases?

Prime Minister Modi asked citizens to refrain from buying new gold for at least one year. He explained that reducing non-essential imports helps the government manage foreign exchange reserves during global supply chain disruptions caused by the conflict in the Middle East.

Disclaimer: This article is solely for educational purposes. The securities / investments quoted here are not recommendatory.

Investors are advised to consult with their financial advisors before making any investment decisions.

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