The bullion industry has proposed a transformative plan to convert India's idle gold holdings into working capital, potentially unlocking significant economic value. According to The Economic Times, this initiative could turn India's substantial gold reserves into a powerhouse for the economy. The proposal comes as the government's recent policy changes have created new dynamics in the gold market, with the 15% import duty implemented from May 13 creating both challenges and opportunities for the industry.
According to reports from CNBC TV18, Sachin Jain, Regional CEO – India at the World Gold Council, believes the road ahead for India's gold market is clearer now, but not without risks. The trade can now plan ahead with more confidence as the days of speculation that followed Prime Minister Narendra Modi's public austerity appeal are largely behind the industry. New notifications from the Ministry and DGFT have given the market a clearer picture of the duty structure. The timing of the duty hike offers some cushion as May through August is traditionally the slow season for jewellery buying in India, which means the industry avoids the worst-case scenario of a demand shock during the festive period.
As reported by CNBC TV18, from May 13, the government raised the import duty on gold and silver to 15% from 6%. The new duty structure includes a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC). For millions of Indians who hold physical gold, Jain says there is an immediate upside to the duty hike. "Overnight, the value of gold has gone up 10% so people who've been sitting on gold, from a financial perspective, their underlying asset value has certainly gone up," he stated. According to TVS Weekly, this policy comes with its own tradeoffs, as the gap between official price and smuggling costs becomes an opportunity for illicit trade. Recent social media reports indicate that gold prices have increased significantly in the domestic market, making jewellery more expensive for consumers and creating an increased burden on wedding and festive season purchases.
According to TVS Weekly, the RBI has been actively accumulating gold reserves to protect India's reserves from geopolitical risk. By 2025, India had accumulated reserves of around 880 tonnes, with gold's share of India's reserves climbing from 8.4% in July 2024 to 16.2% by January 2026. The RBI slowed its purchases to just 4 tonnes for the year as gold prices rose sharply. As reported by TVS Weekly, when the RBI buys gold, it is reshuffling its reserve portfolio, moving holdings out of US Treasury bonds or dollar deposits into gold instead. This rebalancing allows the value to remain stable while changing where it is stored.
As reported by TVS Weekly, in 2019-20, an estimated 120 tonnes of gold were being smuggled into India annually, which was around 15 to 17% of the country's total demand. The government eventually recognised this pattern and cut the duty back to 6% in 2024, explicitly citing smuggling as one of the reasons. According to TVS Weekly, in 2013, the last time India raised duty on gold, both the number and value of smuggled gold increased sharply. The current 15% duty adds a large gap between official and unofficial prices, creating significant arbitrage opportunities that could fuel illicit trade. India spent $72 billion on gold imports in FY26, the second-largest item on the import bill after oil.
The monetization proposal represents a significant shift in how India approaches its substantial gold holdings, potentially transforming idle assets into economic engines. As reported by The Economic Times, the initiative could help unlock greater economic value from household gold holdings. With the government's recent policy changes creating new dynamics in the gold market, this monetization approach could provide a sustainable solution to manage India's substantial gold reserves while generating economic benefits. Recent market analysis suggests that investors may rethink buying physical gold and shift toward digital gold or ETFs due to the higher import duties, while social media reports indicate that buying gold may now feel heavier on the pocket than ever before. The timing of the duty hike and the industry's innovative proposals suggest a more strategic approach to gold management in the coming years.
