The recent increase in gold import duty has significantly elevated domestic bullion prices and triggered a noticeable slowdown in India’s jewellery market. Traders and jewellers across key regions are reporting declining demand, liquidity challenges, and a potential rise in smuggling activities.
The customs duty hike has led to gold prices surging by nearly 10 percent, incentivizing consumers to reduce their purchases and shift towards lighter jewellery and lower-carat options, industry professionals note.
The Gem and Jewellery Export Promotion Council (GJEPC) has expressed concern that elevated duties may further inflate prices and facilitate smuggling. Exporters are already facing tighter working capital conditions. According to the GJEPC, exporters dealing with duty-free gold must now provide bank guarantees ranging from ₹28 lakh to ₹30 lakh per kilogram, placing significant strain on liquidity and disrupting manufacturing cycles, particularly for Micro, Small, and Medium Enterprises (MSMEs) that are crucial to the sector.
In Ahmedabad, jewellers report that the rapid increase in prices has transformed retail buying habits. Customers previously purchasing standard 8-10 gram jewellery pieces are now gravitating towards lighter designs to adhere to their budgets. The trend of exchanging old gold has also become more prevalent.
Sachin Sawrikar, founder and managing partner at Artha Bharat Investment Managers, emphasized that India’s gold demand is deeply embedded in household savings habits and cultural patterns, making it difficult to mitigate through price adjustments alone. He cautioned that higher duties historically widen the gap between official and informal gold channels, increasing the risk of smuggling.
In Bengaluru, jewellers indicate that while near-term sentiment may soften, the underlying demand related to weddings and cultural rituals remains intact. Varghese Alukkas, Managing Director of Jos Alukkas, remarked that India’s cultural inclination towards gold is robust and not easily postponed, and the industry is monitoring whether the current slowdown is a temporary phenomenon or a change in consumer behavior.
In Chennai, N Anantha Padmanabhan, Managing Director of NAC Jewellers, warned that the hike in duties might negatively impact sales volumes and potentially spur smuggling. He suggested that reviving the gold monetisation scheme and mobilizing idle household gold could provide a more sustainable approach in lieu of repeated duty increases.
Traders in Hyderabad reported a jump in gold prices of approximately ₹800, taking the price to ₹16,500 per gram after customs duty surged from 6 percent to 15 percent, resulting in diminished buying activity and liquidity issues.
Kolkata-based Senco Gold acknowledged the significant effect on sales volumes. Suvankar Sen, MD & CEO, predicted a 10-15 percent decline in volumes while suggesting that overall value might remain high due to increased prices. He also noted that demand for diamond jewellery could rise as consumers seek alternative gifting options given the higher gold prices.
Despite the current challenges posed by the duty increase, jewellers across the market maintain that India’s long-term gold appetite remains fundamentally resilient.
Contributions to this report were made by Avinash Nair in Ahmedabad, Anupama Ghosh in Mumbai, Aishwarya Kumar in Bengaluru, Rohan G Das in Chennai, Naga Sridhar G in Hyderabad, and Mithun Dasgupta in Kolkata.
Published on May 13, 2026.
