Government doubles import duty on gold and silver to 18.4% to curb CAD and protect forex reserves
The Indian government has doubled the effective tax on gold and silver imports from 9.2% to 18.4%, effective Wednesday. This decision, made through two notifications, aims to address India's current account deficit (CAD) exacerbated by the West Asia crisis and protect foreign exchange reserves. Prime Minister Modi had previously urged the public to reduce gold purchases. Industry experts, however, criticize the move as "retrograde" and "blunt," predicting it will likely increase smuggling rather than reduce demand, given gold's cultural significance in India. They also warn of negative impacts on employment and exports in the jewellery sector.
Key Points
- The effective tax on gold and silver imports has been doubled from 9.2% to 18.4%.
- The government's rationale is to manage the current account deficit (CAD) and safeguard foreign exchange reserves amidst global volatility.
- Industry players and experts believe the hike is a "retrograde" decision that will likely boost smuggling and negatively affect the domestic jewellery sector.
- The decision follows Prime Minister Modi's appeal to the public to reduce gold purchases for at least a year.
Exam Facts
- Effective import tax on gold and silver doubled from 9.2% to 18.4%.
- Basic customs duty hiked to 10%, and Agriculture Infrastructure and Development Cess (AIDC) to 5%.
- The decision came into effect on Wednesday, May 14, 2026.
- Current Account Deficit (CAD) is the margin by which a country's total imports exceed its exports.
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