India’s gold imports triple amid festive demand, lower import duty

New Delhi: Driven by high festive demand and a reduction in import duty, India’s gold imports jumped 221.41% in a month, reaching $10.06 billion in August, show the commerce ministry’s trade data released on Tuesday.

The sharp increase from July’s $3.13 billion in gold imports reflects growing consumer demand for gold ahead of the country’s festive season, where gold plays an important role in cultural and religious celebrations.

The import of gold stood at $3.06 billion in June.

“The rise in gold exports should be viewed in the context of duty reduction and not just from an import perspective. The cut in import duty from 15% to 6% is a key factor driving this rise in exports,” said Sunil Barthwal, the commerce secretary.

During the festivals of Navratri, Dussehra, and Diwali, which begin next month, Indians tend to purchase gold both as a symbol of wealth and as a popular gift. Currently, 10 grams of 24K gold is priced at ₹75,000.

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Finance minister Nirmala Sitharaman in her budget for 2024-25 cut the total customs duty on gold from 15% to 6%, and on gold doré—an alloy of gold and silver—from 14.35% to 5.35%.

This is the largest cut ever and the lowest duty rate since June 2013. Prior to this announcement, gold import duties had been at over 10% for nearly 11 years. 

Overall, gold imports jumped from $33.6 billion in 2018-2019 to $48.8 billion in 2023-24.

Unlocking funds

With major festivals around the corner, demand for gold has risen as jewellers keep their inventories to meet consumer demand.

“Factors such as the reduction in global gold prices and anticipated high demand during the festival season have led to a rise in gold imports,” the commerce secretary said. Also, “due to lower tariffs, imports of precious metals are now being properly accounted for, which were previously coming from various unreported sources. This is also contributing to the rise in export figures.”

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Mint on 28 July reported that the sharp reduction in import duties on gold and silver would help check gold smuggling. Given that gold is a primary raw material for the gems and jewellery sector, the duty cut can also unlock blocked funds, as businesses are required to pay the duty upfront and can realise the sale value only after production.

Vipul Shah, chairman of the Gems and Jewellery Export Promotion Council, said while gold imports had surged month-on-month in terms of value due to the lower duty and the upcoming festival season, there was no surge in terms of quantity. 

Total gold imports from April to August was 315 tonnes, slightly down from the 318 tonnes imported during the same period last year, Shah told Mint over phone.