NEW DELHI: India’s rising dependence on imported gold has come under sharp focus after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year in the national interest, amid concerns over mounting pressure on the country’s foreign exchange reserves and trade balance.
India’s gold import bill has climbed from $36.5 billion in 2022 to $58.9 billion in 2025. According to the Ministry of Commerce and Industry, India’s gold import bill rose 24% in FY26 to $72 billion, underlining the growing pressure bullion purchases are exerting on the country’s external account. India imports almost all the gold it consumes, making bullion imports a significant burden on the economy.
On May 10, Modi urged citizens to postpone non-essential gold purchases, including for weddings, at a time of global economic uncertainty.
The India-UAE Comprehensive Economic Partnership Agreement (CEPA), which came into force in May 2022, allows gold imports from the UAE at tariffs one percentage point lower than the standard import duty through a Tariff Rate Quota (TRQ) mechanism. The quota began at 120 tonnes annually and is set to rise to 200 tonnes from 2027, covering nearly a quarter of India’s gold imports.
The concessional window became even more attractive after India slashed the standard gold import duty from 15% to 6% in the Union Budget 2024. This effectively reduced the duty on eligible UAE-origin gold imports to 5%.
India also permitted private firms and jewellers to directly import bullion through the India International Bullion Exchange at GIFT City, further easing access to overseas gold supplies.
India’s gold bar imports from the UAE jumped from $2.9 billion in 2022 to $6.7 billion in 2023 and further to $16.5 billion in 2025. Dubai’s share in India’s total gold imports rose from 7.9% before the trade pact to 28% in 2025.
The sharp rise in imports routed through Dubai has raised concerns because the UAE neither mines significant quantities of gold nor undertakes major processing activity.
Industry observers say much of the trade may involve routing gold from third countries through Dubai to benefit from lower Indian tariffs under the trade agreement, raising concerns over potential misuse of Rules of Origin provisions.
There are also concerns that minimal or artificial processing may be used to qualify bullion for concessional tariffs, prompting calls for tighter origin verification norms and a review of precious metal concessions under free trade agreements.
The debate comes at a time when India’s domestic gold demand is undergoing structural shifts due to record prices.
According to the World Gold Council, India’s gold jewellery consumption fell 19% year-on-year to 66.1 tonnes in the January-March quarter of 2026 as soaring prices curbed discretionary purchases. Domestic gold prices during the quarter were 81% higher than a year earlier.
However, despite lower volumes, jewellery demand in value terms touched a record $10 billion in the quarter, reflecting elevated prices and continued demand among affluent consumers.
At the same time, investment demand strengthened sharply. Bar and coin demand rose 34% year-on-year to 62.3 tonnes — the highest first-quarter level since 2013 — nearly matching jewellery demand in volume terms for the first time in years.
The WGC said many consumers shifted from jewellery purchases to bars and coins due to lower making charges and premiums, while gold-backed loans also surged as households increasingly used the metal as financial collateral.
Globally too, high prices weighed on jewellery consumption, while investment demand surged amid economic uncertainty and safe-haven buying.