Gold Import Duty: Gold buying in India has suffered a major setback. Recently, after the government increased the import duty on gold, there has been a decline of about 70% in its demand across the country. Jewelers and bullion traders say that due to increased duty, inflation and weak consumer demand, people are avoiding buying new gold. India is among the largest gold consumers in the world. In such a situation, such a huge decline in demand is being considered a big signal for the market.

Which decision of the government changed the whole game?

The government increased the import duty on gold from 6% to 15% in May. The purpose of this decision was said to be to reduce the import of gold and reduce the pressure on foreign exchange reserves. But this had a direct impact on gold prices and gold became more expensive than before in the domestic market. After the increase in duty, the total tax burden on gold has increased significantly, due to which the interest of buyers seems to be decreasing.

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Demand reduced from 25 tonnes to 7.5 tonnes

According to industry data, the country’s gold demand declined to about 7.5 tonnes in the fortnight ending May 27, whereas it was about 25 tonnes in the same period last year. That means there has been a huge decline in purchases. Officials of India Bullion and Jewelers Association say that after the increase in duty, the demand in the market has decreased by about 70%.

Who is responsible?

If media reports are to be believed, the increase in import duty is not the only reason behind the decline in demand for gold. Rising prices of petrol and diesel, food inflation and increasing pressure on the household budget are also stopping people from buying gold. When a large part of the families start spending on essential expenses, people prefer to postpone big purchases like gold. This is the reason why the number of customers in the market seems to be decreasing.

demand for light jewelery

According to jewelers, customers are now buying light weight jewelery instead of heavy and expensive jewellery. Many people are raising cash by selling their old jewellery, while postponing the purchase of new jewellery. In many big markets including South India, the trend of customers has increased towards low cost and light jewellery.

Who is being affected the most?

This decline in demand for gold has hit small and local jewelers the most. Due to the big brands having stock and strong customer base, they are able to handle the situation to some extent, but for small businessmen the decline in sales has become a big challenge. Bullion traders also believe that higher duty may also create a danger of increasing smuggling, as the price difference between the legal and illegal markets has increased.

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What does the estimate say next?

The World Gold Council estimates that India’s gold demand may reduce by 50-60 tonnes in 2026 due to increase in import duty. This will be a decline of about 10% compared to last year. If gold prices remain high and inflationary pressure continues, the market may remain sluggish in the coming months.