The government on Wednesday raised tariffs on precious metals, including gold and silver, to 15% from 6% to limit imports and free up foreign exchange for necessities such as energy and fertilizer amid a protracted war in West Asia that has disrupted global energy and fertilizer supply chains and sent oil prices soaring.
The sharp increase in customs duties on precious metals – a move aimed at balancing India’s current account deficit – came days after Prime Minister Narendra Modi called for prudence and austerity. He asked people to save foreign exchange to buy necessities, avoid traveling abroad and buy local products.
Experts expect further action by the government on this front, including tightening the liberalized remittance plan to limit the outflow of foreign exchange. Imports of precious metals, especially gold and silver, have been a major component of India’s foreign exchange spending. Gold imports in 2025-2026 jumped by 24.08% compared to the previous year to $71.98 billion, while silver imports rose by 149.48% to $12.05 billion.
To be sure, India has foreign exchange reserves of more than $690 billion, enough to cover imports for ten months. But the government is adopting a cautious approach given the uncertainty in West Asia. India imported about 88.7% of the crude oil it processed in 2025-2026, and paid for it in dollars ($121.8 billion).
According to a senior official in the Ministry of Oil who requested anonymity, the oil import bill may rise in the current fiscal year if the war continues for a long time.
Since February, when the United States and Israel attacked Iran, prices for benchmark Brent crude have risen 48% from $72.87 a barrel to $107.77 (Tuesday’s closing price).
A government official, speaking on condition of anonymity, said the import duty increase announced early Wednesday was intended to “protect macroeconomic stability, preserve foreign exchange, and mitigate non-essential imports during a period of heightened global uncertainty” arising from the ongoing West Asia crisis.
According to a notification from the Ministry of Finance, customs duties on gold and silver imports were increased from 6% to 15%, and import duties on platinum from 6.4% to 15.4%. Later changes were also made to other items, such as gold and silver ore and coins.
“The current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes. As a major importer of crude oil, India remains vulnerable to rising energy prices and supply-side disruptions, which could lead to an increase in the import bill, pressure on inflation, and current account deficit. In such circumstances, prudent management of the country’s external sector becomes essential,” the government official added.
Historically, governments have used tariff adjustments as a policy tool to support macroeconomic stability and effectively manage pressures associated with the Canadian dollar during periods of global volatility.
The official said India’s foreign exchange resources should give priority to essential imports such as crude oil, fertilisers, industrial raw materials, defence requirements, critical technologies and capital goods.
The government official explained that these imports directly support economic activity, food security, infrastructure, manufacturing, exports, and national security.
“In periods of extreme geopolitical volatility and commodity market volatility, policymakers often seek to prioritize external resources toward areas with higher strategic and economic multiplier impacts. Thus, during periods of external stress, thoughtful moderation of discretionary imports may contribute significantly to overall macroeconomic stability and prudent management of the external sector.”
The increase in customs duties on precious metals aims to reduce avoidable import demand and ease pressure on the external account. This measure is neither prohibitive nor anti-consumer in nature. This is a carefully calibrated and proportionate intervention designed to encourage moderation in non-essential imports at a time when external vulnerabilities remain high, the official said.
But experts said high import duties would stimulate the smuggling of precious metals, especially gold.
“This action is also in line with the broader national economic discipline emphasized by the Prime Minister in the context of the evolving global situation. Citizens have been urged to reduce avoidable foreign spending, promote domestic alternatives, conserve fuel, and support national economic resilience through responsible consumption choices. In this broader context, moderation in discretionary precious metals imports can be viewed as part of a broader collective effort to promote economic stability during a period of uncertainty,” the government official said.
Historically, tariffs on precious metals have been calibrated in response to prevailing macroeconomic and external sector conditions.
He added that during periods when external pressures declined, foreign exchange reserves strengthened, and macroeconomic stability improved, customs duty rates on precious metals and related products were also rationalized.
A recent example is the Union Budget 2024-25, where customs duties on gold and silver were reduced from 15% to 6%, and on platinum from 15.4% to 6.4%, reflecting a more relaxed macroeconomic and external sector situation at that time.
