Three days after PM Narendra Modi stood in Hyderabad and appealed to Indians to stop buying gold for a year, the government seemed to have made it official policy. On Wednesday, May 13, 2026, the Finance Ministry raised import duty on gold and silver to 15 per cent from 6 per cent, effective immediately.
Markets responded instantly with domestic gold futures surging 7.2 per cent to ₹1,64,497 per 10 grams. On the ground, in Chennai, 22-karat gold jumped to ₹15,400 per gram on Wednesday bullion opening from ₹14,100 per gram on Monday. That was a rise of nearly ₹1,300 per gram in two days.
The US-Iran war, ongoing for over 10 weeks, effectively closed the Strait of Hormuz, the artery through which close to half of India's crude oil and over 80 per cent of its LPG imports transit. Brent crude rose to around $107/barrel from around $73/barrel before the war, having touched a four-year high of $126/barrel on April 30.
India's forex reserves have fallen from an all-time high of $728.49 billion (week ended February 27, 2026) to $690 billion (week ended May 1), a slump of nearly $38.5 billion in roughly 10 weeks.
The Centre seems to have opted for price-based disincentives. "Rather than resorting to quantitative restrictions or more severe import-management tools, the approach relies on moderate price-based disincentives that preserve market flexibility and consumer choice," a Finance Ministry source told PTI.
India's current account deficit (CAD) is projected to widen to about 1.3 per cent of GDP, up from approximately 0.8 per cent in FY26.
However, the All India Gems and Jewellery Council (GJC) warned the duty hike will hurt the ₹5-lakh-crore jewellery industry and, perversely, encourage smuggling.
"What the industry fears is that this will give rise to the grey market... smuggling is likely to grow, setting up a parallel economy," GJC Chairman Rajesh Rokde told agencies.
India last raised gold import duty to 15 per cent in 2022, during the Russia-Ukraine war, before cutting it back to 6 per cent in the Union Budget 2024-25 to boost the gems and jewellery sector and curb smuggling, a decision that has now been reversed in full.
[With inputs from agencies]