MUMBAI: Two days after Prime Minister Narendra Modi appealed to citizens to reduce gold purchases for a year amid global uncertainty, the Centre on Wednesday sharply raised customs duties on precious metals such as gold, silver and platinum in a bid to safeguard macroeconomic stability and conserve foreign exchange reserves.
The government increased the import duty on gold and silver from 6% to 15%, while the duty on platinum was hiked from 6.4% to 15.4%. Consequential changes have also been made to duties on gold and silver dore, coins, findings and related items.
"The increase in customs duty on precious metals is intended to moderate avoidable import demand and ease pressure on the external account. The measure is neither prohibitory nor anti-consumer in nature," a Finance Ministry source said.
The source also said that the move was aimed at “moderating non-essential imports” at a time of heightened geopolitical tensions arising from the ongoing West Asia crisis. Officials indicated that the decision was driven by concerns over a possible surge in imports of precious metals, which could put pressure on India’s current account deficit and foreign exchange reserves.
According to the official, precious metals, while culturally and financially significant, are predominantly consumption- and investment-driven in nature. Such imports involve substantial outflows of foreign exchange. Further, precious metals occupy a unique position in the import basket because they involve significant foreign exchange outflows while being relatively less linked to productive industrial activity compared to sectors such as energy, manufacturing inputs, infrastructure or technology.
In periods of heightened geopolitical and commodity market volatility, policymakers often seek to prioritise external resources towards areas with higher strategic and economic multiplier effects.
The duty hike comes amid volatile global commodity markets and rising uncertainty over crude oil prices and shipping routes due to the conflict in West Asia. Gold imports are among India’s largest import items after crude oil and electronics, and tend to rise during periods of economic uncertainty as households turn to the metal as a safe-haven asset.
