India has significantly reduced import duties on gold and silver, a move aimed at increasing retail demand and curbing smuggling in the country, which is the world’s second-largest consumer of bullion. The new import duty is set at 5% basic customs duty plus 1% in Agriculture Infrastructure & Development Cess (AIDC), bringing the total to 6%, down from the previous 15%.
Finance Minister Nirmala Sitharaman announced this change during her budget speech, stating that it aims to enhance domestic value addition in gold and precious metal jewelry. Industry officials, including Sachin Jain, CEO of the World Gold Council’s Indian operations, praised the decision as a significant step that would reduce smuggling incentives and create a fair environment for legitimate businesses.
Following the announcement, local gold prices fell by 6% to 68,500 rupees per 10 grams, the lowest in over three months. Earlier this month, prices had reached a record high of 74,777 rupees, which had dampened demand. The reduction in duties is expected to lower prices further and stimulate consumption, according to Saurabh Gadgil, chairman of PNG Jewellers.
In contrast, overseas gold prices rose by 0.4%, and for the first time in eleven weeks, gold was trading at a premium in India, with dealers charging up to $20 an ounce over official domestic prices, compared to a discount of $65 the previous week.
The announcement also positively impacted shares of jewelry makers, with companies like Titan Company, Tribhovandas Bhimji Zaveri, Senco Gold, and Kalyan Jewellers seeing stock increases of up to 10%.
Additionally, Finance Minister Sitharaman revealed an import duty exemption for 25 critical minerals, including lithium, as India seeks to secure supplies of this essential material used in electric vehicle batteries.