The Indian government decided to increase the import duty on gold and silver to 15% from 6% on May 13, 2026, following Prime Minister Narendra Modi’s recent appeal for austerity. The Prime Minister urged Indian citizens to defer non-essential gold purchases for a year amid geopolitical tensions, rising oil prices and pressure on India’s forex reserves. 

The 15% is a combination of 10% Basic Customs Duty (BCD) and 5% Agriculture Infrastructure and Development Cess (AIDC). Let us see the reasons behind this increase and how it will impact you and share prices of companies related to precious metals in this blog. 

Why did the government hike gold import duty now?

India is the world’s second-largest gold consumer and the country imports nearly all of its gold needs. The country imported gold worth $71.98 billion in FY26, up over 24% in value, even though the volumes fell slightly to 721 tonnes approximately.

Import of gold and silver weighs on the import bill of the country as it increases the current account deficit (CAD) along with rising crude oil costs. India makes the payment for all the three commodities in the US dollar. 

The Indian government increased the import taxes because recently the Indian rupee hit a record low of more than Rs 95 against the USD due to rising crude prices, high import bills due to high gold prices, higher imports than exports and continuous selling by foreign institutional investors. 

This new import tax is expected to curb precious metal imports, narrow the trade deficit, support the weakening rupee and save foreign exchange reserves amid the ongoing West Asia/Iran-related crisis and global uncertainty. 

Immediate market reaction

Domestic bullion prices surged after the Indian government’s import tax announcement. Gold futures on MCX jumped by about 6-7%, rising by over Rs 9,700 to reach around Rs 1.63 lakh per 10 grams. Meanwhile, silver futures climbed nearly 7%, getting close to Rs 3 lakh per kilogram.

Jewellery stocks like Titan, Kalyan Jewellers, Senco, Thangamayil Jewellery, etc. reacted negatively initially but the stock prices recovered in the second half of the trading session. For example, Kalyan Jewellers share prices plunged 6% during intraday but recovered and closed lower by 1.77%. Titan which fell 1.73% during intraday closed 0.87% higher. 

However, banking companies who are into gold loans and NBFC companies like Muthoot Finance, Manappuram Finance, etc. are likely to benefit as people would pledge their gold for higher loan amounts as the price of gold rises. 

Impact on buyers and investors

Due to the import duty, jewellery prices are likely to go up significantly and consumers are going to think twice before they make a purchase. Many consumers might delay their purchases, choose simpler designs, go for lower-quality gold or exchange their old gold for new jewellery. 

Even though the amount of gold bought might go down, the strong cultural and saving habits in India mean people still value gold and they will make every effort to buy gold and silver. So, while demand may slow down, the price of gold is expected to remain reasonably elevated. 

Investors may pivot to investing in virtual gold like ETFs, digital gold, or mutual funds instead of buying physical jewellery. For investors, gold still looks good in the long run because of global uncertainties, the shift away from dollar-based currencies and central banks around the world buying more gold. But in the short term, the market is likely to be volatile as people adjust to the new reality

Conclusion 

The rise in import tax might be a shock for consumers and some jewellery-related stocks as it will increase short-term costs for consumers and create challenges for the jewellery trade. But this move by the Indian government is expected to expedite India’s shift toward formal, financialised savings and a stable economy. Moreover, the effectiveness will depend on how long regional tensions last and global commodity prices. 

However, if the tax gap between imported and domestic gold gets bigger, smuggling could increase and black-market activity might come back. Consumers and investors must keenly watch for any further policy updates from the government in the coming months.