India’s gold demand is likely to decline by nearly 50-60 tonnes in 2026, marking an estimated 10 per cent drop compared to last year, following the Centre’s steep increase in gold import duty, according to the latest India Gold Market Update released by the World Gold Council.
The government recently raised the import duty on gold from 6 per cent to 15 per cent — the sharpest increase ever recorded — effectively reversing the duty reduction announced in July 2024. The move, coupled with the Prime Minister’s appeal urging citizens to avoid purchasing gold for a year, is expected to weigh heavily on domestic demand.
Both jewellery purchases and investment demand in bars and coins are likely to be impacted during the current calendar year. However, the extent of the impact may also depend on factors such as global gold prices, inflation, income growth, and monsoon conditions.
According to the council, its econometric analysis shows that import duty changes have both immediate and long-term effects on gold consumption patterns in India. Investment demand is particularly sensitive to tax changes, while jewellery demand tends to remain comparatively resilient.
The report explained that jewellery buying in India is deeply tied to cultural and social obligations, especially weddings and festivals, making it less vulnerable to tax-driven fluctuations. In contrast, purchases of gold bars and coins are more closely linked to disposable incomes and taxation policies.
The WGC further warned that higher import duties historically correlate with rising unofficial or smuggled gold inflows into the country.
Data analysed by the council showed that after the 4 per cent duty hike in 2013, unofficial gold imports surged dramatically from nearly 10 tonnes in the first quarter of that year to about 70 tonnes by early 2014. Even when duties remained unchanged at 10 per cent between late 2013 and mid-2019, smuggled inflows continued at elevated levels, averaging around 34 tonnes every quarter.
The report observed that once smuggling networks become operational, they are difficult to dismantle, resulting in sustained illegal inflows despite stable tax rates.
A similar trend was witnessed after import duties were increased from 10.75 per cent to 15 per cent in July 2022. Unofficial imports climbed from 17 tonnes in the second quarter of 2022 to almost 50 tonnes by the end of the year and remained significantly high through most of 2023.
However, the council highlighted that the reduction in import duty to 6 per cent in July 2024 led to an immediate and sharp decline in unofficial imports, which reportedly fell close to zero shortly thereafter.
The WGC cautioned that the latest duty increase could once again encourage illegal gold inflows while simultaneously dampening legitimate consumer demand in one of the world’s largest gold markets.
