New Delhi, India — India has announced changes to its gold import duties, effective from October 2025. This decision is poised to influence gold prices, the jewellery sector, and even personal loans tied to gold.

With gold being a cultural staple and a key asset for many Indian households, understanding these changes is crucial for consumers and investors alike. The new import duty has been set at 15%, a rise from the previous rate of 10%. This hike follows a period of significant fluctuations in global gold prices, which have risen sharply due to various geopolitical tensions and inflation concerns.

The Indian government aims to curb gold imports to manage the trade deficit and strengthen the rupee. According to the Ministry of Commerce, gold imports in 2024 reached an all-time high of 150 billion USD, exacerbating the country’s current account deficit. By increasing import duties, the government hopes to stabilize the economy while still catering to the insatiable demand for gold in the country.

Context of Gold Demand in India

India is the second-largest consumer of gold globally, with the metal deeply embedded in its culture and economy. The World Gold Council reported that in 2023, India consumed approximately 800 tons of gold, primarily for jewellery, which accounts for about 80% of its total demand. This cultural affinity for gold means that any changes in duty can have far-reaching implications.

The Indian government aims to curb gold imports to manage the trade deficit and strengthen the rupee.

Gold is often viewed as a safe investment. During economic uncertainty, demand typically spikes. For instance, during the COVID-19 pandemic, gold prices surged, reflecting its status as a hedge against inflation and market volatility. The recent spike in prices, reaching around 2,000 USD per ounce, has made gold less accessible for the average consumer.

Impact on Prices and the Jewellery Sector

With the new 15% import duty now in effect, the price of gold in India is expected to rise further. Jewellers have already warned that retail prices could increase by approximately 5-10% in the short term, potentially leading to a slowdown in demand. The All India Gems and Jewellery Domestic Council has expressed concerns that this may affect sales during peak seasons such as Diwali, a time when gold purchases traditionally surge.

Moreover, as consumers face higher prices, they may turn to alternatives, such as silver or platinum, affecting the entire jewellery market. This shift might also encourage a rise in the use of synthetic alternatives, which are increasingly gaining popularity due to their lower costs and sustainability factors.

Effect on Financial Products Linked to Gold

The increase in gold prices is likely to impact personal loans secured against gold. Financial institutions commonly offer loans based on the value of gold held by the borrower. As gold prices rise, the amount that can be borrowed against it also increases; however, the higher import duties may dissuade new investments in gold, leading to a potential decrease in new loan applications.

Furthermore, banks may tighten their lending criteria as they assess the risk associated with fluctuating gold prices. For consumers who rely on gold loans for liquidity, this could create challenges, especially if prices stabilize or decline after an initial surge.

Long-Term Market Dynamics

While the immediate effects of the new import duty are clear, the long-term impacts are still unfolding. Analysts suggest that if gold prices continue to rise, we may see an increase in gold recycling in India, as consumers look to liquidate old jewellery for cash. This could create a secondary market that might balance the demand and supply dynamics.

Moreover, as consumers face higher prices, they may turn to alternatives, such as silver or platinum, affecting the entire jewellery market.

Additionally, the increased duties could prompt local refiners and manufacturers to boost domestic production of jewellery, potentially reducing reliance on imported gold. This shift might help stabilize prices in the long run while also contributing to job creation within the local economy.

Conclusion: A Look Ahead

As India navigates the complexities of its gold import policies, stakeholders must remain vigilant. Consumers should stay informed about market trends and consider alternative investment avenues, while jewellers may need to adapt their strategies to maintain profitability in a changing landscape. The gold market will continue to evolve, and those who anticipate shifts in consumer behavior and regulatory changes will be best positioned to thrive.