SBI Research has reported that the recent increase in customs duty on gold imports, now set at 15 percent, may lead to higher domestic gold prices, shift physical market dynamics, and impact India’s current account deficit (CAD).
The report indicates that this duty hike could trigger significant changes in the bullion market, potentially diverting supplies through unofficial routes. “The decision to increase duty on gold imports has been taken on numerous occasions in the past. However, imposition of duty has its consequences in diverting the physical supply to grey channels,” the report states.
Furthermore, the widening gap between international and domestic gold prices following the duty increase may create arbitrage opportunities. The distinction between offshore and onshore gold prices has led to increased arbitrage potential, as noted in the report.
Historically, such duty increases have also led to an uptick in seizures by law enforcement agencies. Regarding the external sector, SBI Research has emphasized that gold imports raise ongoing concerns about the CAD. However, the research clarifies that gold imports alone have not consistently driven CAD trends. Though projections indicate a considerable impact from gold imports on CAD, the research states that there is no clear trend linking them definitively.
The report highlights that despite a decline in gold import volumes, the total import bill soared due to rising prices. The value of gold imports increased dramatically from $57.9 billion in FY25 to $72.4 billion in FY26. In volume terms, however, gold imports have decreased since FY24, with a reduction of approximately 5 percent noted for FY25 and FY26.
Looking to the future, SBI Research expects a reduction in import volumes as a result of the recent duty hike. “We anticipate that the current hike in duty may lead to similar trends as seen in the past. However, given the pronounced negative volume effect observed in the last two years, we expect a downward adjustment in volumes, the extent of which remains uncertain,” the report concludes.
Published on May 14, 2026.
