India’s gold imports plunge nearly 58% in August after government raises customs duty to 15%

India’s gold imports plunged 57.75 per cent year-on-year to $2.3 billion in August after the government sharply increased customs duty on precious metals, according to data released by the Commerce Ministry. The steep contraction came after the import duty on precious metals was raised from 6 per cent to 15 per cent with effect from May 13, making overseas purchases considerably more expensive for importers and the domestic jewellery industry.

The August decline, however, contrasts with the cumulative trend during the first five months of the current financial year. Gold imports during April-August 2026-27 increased 3.38 per cent to $17.47 billion, indicating that purchases earlier in the period remained strong enough to offset the sharp fall recorded during August. Gold is a significant component of India’s merchandise import basket, accounting for more than 5 per cent of the country’s overall imports.

Silver imports surge

While gold shipments contracted sharply, silver moved in the opposite direction. Imports of the white metal jumped 127 per cent to $1.02 billion in August. On a cumulative basis, however, silver imports during April-August declined 8.81 per cent to $1.74 billion, showing that the sharp monthly increase has not yet reversed the broader contraction recorded during the financial year.

The contrasting movement in the two precious metals comes after the government raised their import duty to 15 per cent. Higher duties increase the landed cost of imported bullion and can influence purchasing decisions among jewellers and traders, particularly when international precious-metal prices are already elevated.

Switzerland remains top supplier

Switzerland continued to be India’s largest source of imported gold, accounting for around 40 per cent of shipments. The United Arab Emirates followed with a share of more than 16 per cent, while South Africa accounted for approximately 10 per cent. These three markets consequently remain central to the supply of bullion required by India’s enormous jewellery industry.

Overall imports from Switzerland fell sharply during August, declining 45.4 per cent to $1.28 billion. The contraction reflects the substantial decline in gold purchases given Switzerland’s dominant position as a source of the precious metal for Indian buyers.

Trade deficit implications

India is the world’s second-largest consumer of gold after China, with domestic demand driven predominantly by jewellery purchases as well as investment. Consumption typically receives additional support during the festival and wedding seasons, when household demand for the precious metal traditionally strengthens.

Heavy dependence on imported gold, however, has long presented a challenge for India’s external finances. Large bullion purchases increase the country’s merchandise import bill and can contribute to widening the current account deficit. The sharp August decline could therefore provide some relief on the external account if the trend continues.

The impact of the higher customs duty will become clearer over the coming months as India enters the important festive and wedding demand period. A sustained reduction in imports could help contain the trade deficit, although high domestic prices and the increased tax burden could also weigh on jewellery demand and encourage buyers to turn towards recycled gold.