Jewellery stores across India experienced a sharp decline in demand following the government's decision to raise gold and silver import duties to 15% from the previous 6%. According to Business Standard, Mumbai's famous Zaveri Bazaar was unusually quiet on Wednesday, with Kumar Jain, owner of Umedlal Tilokchand Zaveri, describing it as 'pin drop silence' after the import duty hike came into effect. Rajiv Popley, director at Popley Group, reported that 65-70% of customers are now coming in to exchange gold since prices crossed ₹130,000 per 10 grams for 24-carat gold. In Delhi's Dariba Kalan market, Neelmani Jewels witnessed 100% impact of PM Modi's announcement, with Harsh Jain noting that sentiment has been low since the announcement. The wedding season ending on May 15 is also contributing to the muted demand, though jewellers expect the dampened sentiment to continue for some time.
India raised the effective import tax on gold and silver to 15% from the previous 6%, marking a significant increase in duties. According to reports from Mint, this move comes as the government attempts to rein in surging precious metal imports and protect India's foreign exchange reserves amid elevated crude oil prices and geopolitical tensions in West Asia. Prime Minister Narendra Modi urged citizens to defer gold purchases for a year to help conserve foreign exchange reserves, with 24-karat gold prices rising to about ₹1,53,980–1,54,090 per 10 grams on Tuesday and reaching ₹1,65,470 today. The decision is expected to make gold more expensive in the domestic market while helping the government protect foreign exchange reserves and control the trade deficit. Latest government sources confirm that the tariffs are neither prohibitory nor anti-consumer, aimed at curbing non-essential imports as West Asia conflicts aggravate external-sector risk, with forex resources needing to be prioritised towards essential imports amid the West Asia crisis.
Retailers are quickly adapting to prevent customer abandonment of jewellery purchases. As reported by Mint, in its third-quarter FY26 earnings commentary, Titan Co. said more than half of its jewellery sales now come from gold exchange programmes. Following the PM's announcement, Kalyan Jewellers launched the 'Nation First – Gold4India Initiative,' focusing on old-gold exchange programmes, gold monetization schemes, and related initiatives. Industry experts expect significant demand impact, with Surendra Mehta from India Bullion and Jewellers Association Ltd. predicting jewellery business will decline by 5-7% and total demand may fall by 10%. In Bengaluru, mixed reactions were seen from store managers at six jewellery shops, with Tanishq reporting sales of ₹18 crore in April, up from ₹11 crore a year earlier, while BNR Gold and Diamonds made only 15gm of jewellery in three days compared to usual weekly production of 600gms. However, customers are now postponing purchases and opting to recycle old ornaments instead of buying new jewellery.
The impact varies significantly across different regions and market segments. In Kolkata's Bowbazar, where 350 showrooms dot the central stretch, jewellers report uniformly anxious moods with 30-50% drop in footfall in many cities and 80% decline in some trading hubs. According to Business Standard, Sourav Roy, managing director of Radha Gobindo Roy Grandson Jewellers in Cuttack, stated that businesses need a 'survival package' including interest waivers on bank loans, support for MSME jewellers, and livelihood assistance for artisans and logistics workers. The ₹72 billion gold imports in FY26, accounting for 9.3% of the country's total import bill, create significant policy challenges for the government. Manav Modi from Motilal Oswal Financial Services noted that since India relies heavily on imports to meet domestic gold demand, higher duties are expected to help narrow the trade deficit and provide support to the rupee, though experts warn that illegal imports may help non-genuine businessmen.
India's decision to raise gold and silver import duties has provided support to the rupee, according to latest market reports. However, the currency continues to face pressure from rising US Treasury yields and elevated oil prices, which are weighing on overall market sentiment. The rupee's resilience against the dollar comes as the government implements measures to control precious metal imports and protect foreign exchange reserves amid geopolitical tensions in West Asia. The currency's performance reflects the mixed impact of policy support versus global headwinds affecting emerging market assets. Market analysts suggest that higher tariffs might paradoxically be a positive signal for the metal, as they could nudge people to view gold as pricier yet steady, potentially maintaining demand solidity despite the increased costs. The mixed reactions in jewellery stocks with Titan closing 0.8% higher while Kalyan Jewellers was down 1.77% reflect the sector's uncertainty about the long-term impact of the policy changes.
