12 - 05 - 2026

India may hike customs duty on gold: Jefferies

The customs duty on gold, which was reduced to 6% from the earlier 15%, could be increased again, analysts’ firm Jefferies said in a report, adding that regulatory risks for the Indian jewellery sector have intensified.

“While it is unclear what the government’s action will be following Prime Minister Narendra Modi’s speech, we note that the customs duty, which was reduced from 15% to 6%, could be increased again. There may be higher GST levy,” the report released on May 12 said.

Gold imports in value terms reached a record peak of over $70 billion in FY26. According to Jefferies, the government may now move beyond voluntary appeals to mandatory measures, which could include reversing recent duty cuts or increasing Goods and Services Tax on the metal to reduce discretionary US dollar outflows.

In an address earlier, PM Modi urged households to adopt austerity measures and avoid buying gold jewellery for one year.

Jefferies believes this move is a strategic attempt to conserve foreign exchange as the country faces elevated crude oil prices and a weakening rupee.

The appeal has triggered a sense of “déjà vu” within the industry, drawing direct parallels to the 2013 economic crisis. Jefferies noted that during that period, similar requests for restraint from the Finance Ministry preceded an aggressive playbook of statutory curbs, which included raising import duties to 15% from 2% and the introduction of the 80:20 import-export rule.

Titan better positioned

According to Jefferies, Titan Company is in better position than in previous cycles due to its increased reliance on domestic gold exchanges and more robust sourcing, though it still faces macro headwinds.

Taking cues from past issues, Titan has worked over the years to reduce the impact of potential regulatory headwinds, though it is not fully secure. For example, today, its share of gold exchange is about 50%, which is much higher than in the earlier period; domestic sourcing has also become a source, which was still not developed then.

Discontinuation of gold on lease should be only prospective, as was the case back then, and this forms about 40% of Titan’s gold requirement, in our view. Interestingly, in fourth quarter, Titan sold as much as Rs 6100 crore of gold bullion, signalling adequate gold on hand.

India’s gold imports surged to over $50 billion in each of FY12 and FY13, with quantities exceeding 1,000 tonne. These were also periods of acute Current Account Deficit (CAD) pressure, which peaked at about 6.8% in December 2012. The pressures were evident in Indian rupee, which fell by 20% from January 2013 to September 2013. Interestingly, back then too, the then Finance Minister P. Chidambaram, urged Indian households to slow down their gold purchases in June 2013, following which a series of interventions came about.