Budget 2026 expectations: Will gold and silver import duties be hiked? – The Times of India

India’s gold and silver imports surged to record levels in 2025, ringing alarm bells in government and policy circles as soaring precious metal prices threaten to widen the trade deficit and add fresh pressure on the rupee. With limited policy tools available, officials and market participants told Reuters raising import duties is once again emerging as a key option under consideration.Any move to raise import duties may be signalled through the Union Budget 2026, either via changes in the customs duty structure or through an enabling provision allowing the government flexibility to act if external pressures intensify.Gold imports rose 1.6% year-on-year to $58.9 billion in 2025, while silver imports jumped sharply by 44% to $9.2 billion, even as global prices of both metals hit historic highs. Together, gold and silver accounted for nearly a tenth of India’s total foreign exchange reserves last year, a share that could rise further in 2026 if prices continue to climb.

Why gold and silver imports worry policymakers

India is the world’s second-largest consumer of gold and the largest market for silver, but it depends almost entirely on imports to meet domestic demand for gold and more than 80% of its silver requirements. The surge in imports has widened the trade deficit and contributed to weakness in the rupee, which touched a record low earlier this month.While silver has extensive industrial uses—from solar power to electronics—gold is largely consumed for jewellery and investment. Policymakers have long viewed gold demand as non-essential and a drain on foreign exchange, prompting repeated attempts to curb imports through higher duties.

Why markets expect a duty hike

With gold and silver prices at record highs, even stable import volumes translate into a sharply higher import bill. Trade and industry officials say this could prompt the government to consider raising duties in the coming weeks to contain external imbalances.India has a precedent. In 2012–13, New Delhi sharply increased gold import duties to stabilise the rupee during a period of currency stress. Traders now speculate a similar move could be on the cards, potentially reversing the 2024 duty cuts, when import taxes on both metals were slashed to 6% from 15% to curb smuggling.Reflecting these expectations, gold and silver in India are already trading at a premium to global benchmarks as markets price in the risk of higher duties.

Why demand has held up despite record prices

Gold prices in international markets have surged 98% since the start of 2025, dampening jewellery demand. Yet overall consumption has remained resilient due to a sharp rise in investment demand.While jewellery accounted for over three-fourths of India’s gold demand until 2023, investment now makes up more than 40% of total consumption. Investors have increasingly turned to gold coins, bars and exchange-traded funds (ETFs) to benefit from the rally.ETF inflows jumped 283% in 2025 to a record Rs 429.6 billion ($4.69 billion), cushioning the impact of weaker jewellery buying and keeping imports elevated.

Will higher duties curb demand?

Past experience suggests duty hikes may have limited impact. When India raised gold import tax to 10% in 2013 from 2%, demand remained largely unchanged. Domestic gold prices have climbed from about Rs 8,000 per 10 grams in 2006 to around Rs 1.62 lakh now, yet annual demand has not seen a sustained decline.Analysts say a fresh duty hike of 4–6 percentage points is unlikely to deter buyers, who absorbed a 76.5% price jump in 2025. Instead, higher duties could lift investor returns and risk reviving smuggling.

Why silver is also under scrutiny

Silver prices have risen even faster than gold, sharply inflating India’s import bill. While industrial demand was the main driver earlier, investment demand has gained traction in recent months.Silver ETF inflows surged to Rs 234.7 billion in 2025, up from Rs 85.69 billion a year earlier. The growing popularity of silver as an investment suggests imports could rise further if the price rally persists.— just after peg– Need 1-2 lines on how this change may be announced in the Budget