Veteran banker and Kotak Mahindra Bank founder Uday Kotak has issued a stark warning about India's gold import situation, stating that the country's gross gold import bill could rise to $88-90 billion in FY27. Speaking at the Conference on Financing India's Journey Towards Viksit Bharat, attended by Finance Minister Nirmala Sitharaman and finance ministers of states and Union Territories, Kotak emphasized that 'Indians and their gold - that is a puzzle we have to find a way to solve'. According to The Times of India, Kotak suggested that a committee could be formed to examine the issue and work out solutions that take into account people's requirements while addressing the country's capital and current account challenges. The warning comes as India's gold imports have been in focus since the start of the US-Iran war, adding pressure to the country's import bill at a time when oil is also rising and the rupee is depreciating.
Kotak highlighted the significant impact of gold imports on India's external balance, noting that gold imports gross in one year is $72 billion. As reported by The Times of India, he explained that for FY26, India's current account deficit was $25 billion, but excluding gold, the country had a current account surplus. Based on estimates for the ongoing financial year, Kotak estimated that India's current account deficit could be around $60 billion if oil prices averaged about $90. He argued that the gold held by Indian households may be substantial individual wealth but has not been channelled into productive economic use. According to Kotak Institutional Equities, gold imports during the first five months of FY27 stood at $17.5 billion, compared with $16.9 billion during the corresponding period of FY26. Kotak estimates India's CAD at 1.2% of GDP in FY27, assuming an average crude oil price of $85 a barrel, but cautioned that his gold import assumption is itself a risk to this forecast.
A key trigger was the increase in gold import duties effective May 13, 2026, with the total import duty rising to 15% from 6%. As reported by Kotak Institutional Equities, the basic customs duty increased from 5% to 10% and the agriculture infrastructure and development cess rose from 1% to 5%. Including GST, Kotak estimates that the effective duty and GST incidence on the landed value of imported gold increased to 18.5% from 9.2%. The higher duty resulted in domestic gold prices rising by around 9% relative to global prices. Kotak noted that stable gold prices may have reduced the investment appeal of physical gold for households, while gold ETF flows serve as an indicator of household behavior, with inflows increasing sharply when gold prices were rising in the second half of 2025 but declining as prices weakened after February 2026.
According to Kotak Institutional Equities, the decline in official imports since May 2026 could reflect three factors: structural reduction in household demand following the duty increase, temporary pause as consumers wait for possible duty cuts, or greater use of unofficial import channels. The 'good scenario' involves households permanently reducing their appetite for physical gold, which would improve India's external balances. The 'bad scenario' suggests consumers are simply delaying purchases due to fear of future duty cuts, with potential recovery when duties are reduced. The 'ugly scenario' involves gold demand shifting to unofficial channels, reducing government customs and GST collections while leaving underlying demand largely intact. Kotak has proposed a different taxation structure for gold — higher GST combined with lower import duties — arguing this could discourage imports while encouraging recycling and protecting government revenues.
Kotak advocated for greater fiscal consolidation, pointing out that India's consolidated fiscal deficit was still above 7 per cent. According to The Times of India, he stated that 'At 7 plus percent consolidated fiscal deficits, we need to get tighter', while recognizing the fiscal pressures confronting both the central government and the states. He emphasized the need for India to expand its production of goods and services that have demand in global markets, while simultaneously cutting its reliance on other countries for critical goods and services. Kotak also cautioned against excessive financialisation, arguing that capital markets should ultimately serve the purpose of capital formation rather than becoming primarily centred on trading activity, volumes and market movements. 'At times when the objective of capital formation gets lost and we focus on just markets, volumes and trading, we at times run the risk of missing the key reason why we have financial markets,' he said.
