Budget 2025: Gold Market Braces for Possible Duty Hike Amid Soaring Imports

With Budget 2025 approaching, speculation is mounting over a possible increase in gold import duties. The historic duty cut in 2024 spurred gold demand but also widened the trade deficit, putting pressure on the rupee.

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Sumit Kumar
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By A Staff Reporter

NEW DELHI – As India gears up for the Union Budget 2025 on February 1, the gold market is on edge amid concerns over a potential increase in import duties. The 2024 Budget had brought a major boost to the jewelry industry by slashing gold import duties from 15% to 6% and from 14.35% to 5.35% for gold dore imports. The sharpest reduction in a decade made gold more affordable and spurred a surge in demand.

However, the downside of this move is now becoming evident. The duty cut has contributed to a sharp rise in gold imports, widening the trade deficit and exerting pressure on the rupee, which has depreciated to nearly 87 against the dollar. Economic analysts argue that while the lower duties have fueled consumption, they have not significantly increased domestic value addition or exports, raising concerns over the policy’s long-term sustainability.

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Trade data for November 2024, released on December 16, showed that gold imports had surged to $14.8 billion, accounting for 21% of India’s total merchandise imports. Although the figures were later revised downward, the overall volume of gold imports remains elevated. Following the duty cut in July 2024, imports skyrocketed by 104% year-on-year in August, with numbers cooling off in the subsequent months before hitting new highs in November.

As the world’s second-largest gold consumer, India heavily depends on imports to meet demand. The government initially aimed to curb gold smuggling and enhance the industry’s competitiveness by lowering duties. Jewelry manufacturers argue that the move has freed up working capital, improved financial health, and made India’s jewelry exports more competitive. They are urging the government to maintain the current duty structure to sustain these benefits.