The Narendra Modi-led government has increased customs duty on imports of precious metals, including gold and silver, from six per cent to 15 per cent, a move that comes after the Prime Minister’s austerity drive.
A government official said the measure is aimed at protecting macroeconomic stability, saving foreign exchange, and relieving non-essential imports amid global uncertainty in the wake of the ongoing West Asia crisis, HT reported earlier.
Customs duties on gold and silver imports were raised from 6% to 15%, while customs duties on platinum were increased from 6.4% to 15.4%. He also said that later changes were made to other items, including gold, silver, coins, and findings.
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India’s action is also aimed at defending its currency – the Indian rupee – which has been hit hard against the US dollar amid the West Asian war. On Tuesday, the rupee fell by 40 paise to approach a new all-time low of 95.68 against the US dollar.
The government official said that increasing customs duties on precious metals aims to reduce avoidable demand for imports and ease pressure on the external account.
“Wise management of the external sector is essential”
The current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes, the government official said, citing an earlier HT report. “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 official said.
The official also said that the country’s foreign exchange resources should be prioritized for essential imports such as crude oil, fertilisers, industrial raw materials, defense requirements, critical technologies and capital goods. Why? These elements directly support economic activity, food, and national security, among other factors.
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However, precious metals depend on consumption and investment, and involve a large inflow of foreign exchange.
He added: “In periods of geopolitical volatility and commodity market volatility, policymakers often seek to prioritize external resources towards areas with higher strategic and economic multiplier impacts. Therefore, during periods of external stress, thoughtful moderation of discretionary imports may contribute significantly to overall macroeconomic stability and prudent management of the external sector.”
India responds proactively to external risks
Actions such as increasing tariffs send a clear message about wise economic management. This shows that India is proactively responding to emerging external risks with timely, deliberate and targeted interventions, thereby reducing the need for more destructive corrective actions later on, the official added.
Historically, tariffs on precious metals have been calibrated in response to prevailing macroeconomic and external sector conditions.
The current rise is part of a broader strategy to boost India’s economic resilience, prioritize essential imports, save foreign exchange and protect the current account.
Rupee recovers after tariff hike
The Indian rupee rebounded by 16 paise from an all-time low to 95.52 against the US dollar early on Wednesday. Forex traders reportedly said that market participants expect some flexibility in the dollar-rupee binary as gold importers restrict their demand, news agency PTI reported.
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The move “will also help rein in the Canadian dollar and help the rupee to some extent,” said Anil Kumar Bhansali, head of treasury and CEO of Finrex Treasure Advisors LLP.
High prices of gold and silver
Gold prices increased by $9.723 to $1.63 lakh per 10 gram in futures trading on Wednesday, while silver rose 7 per cent to approach the level $3 lakh per kg after the government raised import duty on precious metals.
On the Multi Commodity Exchange (MCX), gold futures for June delivery rose by… $9,723 (6.34 percent) to $1,63,165 per 10 grams.
Silver also saw a sharp rise, with the most actively traded July contracts expiring $19,439 (6.97 percent) to $2,98,501 per kg on MCX.
WFH, No Gold, No Foreign Trips: Modi’s Austerity Campaign
Prime Minister Narendra Modi stressed austerity measures amid global economic turmoil in the face of the ongoing West Asian war.
Modi called for reducing the use of petrol and diesel, increasing car sharing, encouraging work from home and virtual meetings, and avoiding unnecessary foreign spending such as buying gold and traveling abroad.
Regarding foreign exchange outflow, the Prime Minister also urged citizens to avoid certain expenses. “The country spends a lot of foreign currency on gold. I would like to request all the citizens of the country that until the situation returns to normal, we should avoid buying gold,” PM Modi said.
He also said that people should avoid foreign trips and weddings, as a lot of foreign currency is spent on them. The Prime Minister called for enhancing the consumption of local goods and praised natural agriculture.
(With inputs from Rajeev Jayaswal)
