India's illegal gold imports surge 1500% to a three-year high: What's behind the jump?
India's illegal gold imports spiked 1500% from 3 tons to 50 metric tons in the July-September quarter, according to a report. Blaming it on the government's duty hike, Bloomberg, citing data from the World Gold Council (WGC), said that illegal imports climbed to their highest level since 2023.
Such imports often bypass official duties through channels such as smuggling or by carrying small quantities in luggage carried by individual travellers. Previous duty increases have tended to make these routes more attractive, the report noted.
WGC data suggests import duties on gold were raised several times between 2012 and 2013, in 2-percentage-point steps, reaching 10%. After a gap of nearly six years, the duty was raised by another 2.5 percentage points in July 2019. Since then, changes have been more frequent, with cuts in 2021 and 2024 and sharp hikes in 2022 and 2026. Here's a look:
| Date | Revision |
|---|---|
| 16 Jan 12 | +2% |
| 16 Mar 12 | +2% |
| 21 Jan 13 | +2% |
| 5 Jun 13 | +2% |
| 13 Aug 13 | +2% |
| 6 Jul 19 | +2.5% |
| 2 Feb 21 | -1.75$ |
| 1 Jul 22 | +4.25% |
| 24 Jul 24 | -9% |
| 13 May 26 | +9% |
Source: World Gold Council
A 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC) was imposed on gold and silver imports, taking the effective import tax to 15% from 6% effective May 2026. Besides, gold imports also attract a 3% Integrated Goods and Services Tax (IGST). India is the world’s second-largest gold consumer and the biggest silver importer, meeting nearly all its domestic demand for both metals through imports. Market participants had speculated that the higher import duty could make gold smuggling more profitable, encouraging grey-market activity.
In a bid to curb international purchases of the metals and ease pressure on the country's forex reserves, India raised the import duty on gold and silver in May. The Indian rupee has been among Asia’s weakest-performing currencies this year. It may be recalled that PM Narendra Modi had directly appealed to Indians to avoid buying gold.
According to WGC's Gold Demand Trends for Q3, gold jewellery consumption in India declined 20% YoY, marking the weakest third quarter since 2020. Year-to-date demand for gold jewellery was down 18%, as affordability remained an 'overriding constraint'.
Consequently, the lightweight, lower-carat and studded products led demand in 2026. The WGC report also noted an uptick in diamond jewellery in 18k, 14k, and 9k; this strategy allowed retailers to maintain margins despite selling lower volumes of gold.
Gold ETFs recorded positive inflows, attracting 6 tonnes during Q3 2026. On the contrary, the demand for gold bars and coins dropped 40% year-on-year to 55 tonnes in Q3 2026, as against 91.6 tonnes in the corresponding quarter of the last year.
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