Gold demand in India has plunged dramatically after the government imposed a steep increase in import duty, triggering one of the sharpest short‑term declines the industry has seen in years. According to industry estimates, demand fell to about 7.5 tonnes in the fortnight ending 27 May, compared with nearly 25 tonnes during the same period last year — a drop of roughly 70%.
The decline follows the government’s decision to raise the import duty on gold from 6% to 15%, effective 13 May. The move was aimed at curbing gold imports, reducing pressure on the current account deficit and stabilising the rupee. However, jewellers and bullion traders say the sudden hike has pushed retail prices sharply higher, discouraging buyers and disrupting the market during what is typically a strong demand period.
Industry officials report that footfall in jewellery stores has fallen significantly, with many consumers postponing purchases in anticipation of potential price corrections. Traders say the higher duty has widened the gap between domestic and international prices, making legal imports more expensive and raising concerns about a possible rise in unofficial inflows.
Gold has long held cultural and economic significance in India, the world’s second‑largest consumer of the metal. Demand typically rises during weddings, festivals and auspicious occasions. But the latest duty hike has created uncertainty among retailers, who fear prolonged weakness if prices remain elevated.
Analysts note that while the government’s objective is to reduce import dependence, the sharp increase may temporarily distort the market. Some expect demand to stabilise once consumers adjust to the new price levels, while others warn that sustained high duties could push more trade into grey channels.
The industry is now watching closely to see whether the government introduces further measures or whether global price movements help ease domestic market pressures.