India Hikes Gold Import Duty Amid West Asia Crisis

In response to the West Asia crisis, India increased import duty on gold from 6% to 15% to curb non-essential imports. The decision aims to alleviate pressure on forex reserves and reflects a proactive strategy for external risk management. It could, however, boost the grey market.

In a strategic move to tackle economic challenges posed by the ongoing West Asia crisis, the Indian government has increased the import duty on gold and silver to 15%, effective May 13. This decision reflects a proactive response to the escalating costs of essential imports like crude oil and fertilisers.

Prime Minister Narendra Modi has advocated for austerity measures, encouraging moderation in non-essential imports to stabilize the macro-economic environment. The duty hike from 6% to 15% aims to reduce foreign exchange expenditure, as India's gold imports are largely driven by the jewellery industry.

The All India Gems and Jewellery Council warns that this move might unintentionally fuel the grey market and increase smuggling activities. Nevertheless, the government insists it's a preventive measure to prioritize essential imports, minimize external vulnerabilities, and avoid severe import-management tools.