Gold and silver prices in India surged after the government raised import duties on precious metals to curb a widening trade deficit [1, 2].
The price spike threatens the domestic jewellery industry during the peak wedding season, a critical period for retail sales. Higher costs may deter consumers from purchasing traditional gold ornaments, potentially slowing market growth [2].
According to reports, the import duty on gold increased from 7.5% to as high as 12.5% [1]. While some reports suggest the rate was raised to 10% [2], the higher figure reflects the most significant impact on market pricing. This policy shift took effect on March 1, 2024 [1, 2].
Market volatility has been further exacerbated by geopolitical tensions in West Asia. Supply disruptions linked to the conflict in Iran have tightened the global gold supply, adding upward pressure to domestic prices [1, 2].
S. Patel, president of a jewellery association, said gold prices have breached the Rs 65,000 per 10 grams mark, a level not seen since 2022 [2]. Specifically, 24-carat gold reached Rs 66,000 per 10 grams [1].
Industry analysts warn that these costs will impact consumer behavior. R. Sharma, a market analyst, said, "The hike in import duty is expected to push gold prices higher and could dampen demand during the peak wedding season" [2]. Experts project a potential decline in jewellery demand of approximately 10% for the wedding season [2].
Beyond retail sales, the government faces new enforcement challenges. A customs official said, "We may see an increase in smuggling as a result of the higher duty" [2].
“Gold prices have breached the Rs 65,000 per 10 grams mark, a level not seen since 2022”
The Indian government is attempting to balance macroeconomic stability by reducing the trade deficit through higher tariffs. However, by doing so during a period of geopolitical instability in West Asia, they have created a price squeeze that risks idling the formal jewellery sector and incentivizing an underground smuggling market.
