Gold Duty Hike Dents Demand and Sparks Smuggling Concerns in the Jewelry Industry

The recent increase in India’s gold import duty from 6% to 15% has led to a significant surge in domestic bullion prices, raising them by nearly 10%. This sharp hike has prompted traders and jewellers to report a noticeable slowdown in the jewellery market, with decreasing demand particularly for standard 8-10 gram pieces. Industry experts have flagged concerns regarding liquidity stresses and a potential rise in smuggling activities as consumers pivot towards lighter jewellery and lower-carat options. The Gem and Jewellery Export Promotion Council (GJEPC) has indicated that these higher import duties could further inflate prices, thereby impacting both domestic consumption and export dynamics.

For the common citizen, this increase in gold prices poses a burden, making traditional gold purchases less affordable. As jewellers indicate, consumers are now reconsidering their purchases and increasingly opting for lighter designs and exchanges of old gold to remain within budget constraints. The impact on demand is likely to have major ripple effects on the market, particularly among smaller traders and MSMEs, who are already navigating tighter working capital conditions. Despite these challenges, some experts argue that India’s cultural affinity for gold as a form of wealth and celebration will mitigate the long-term decline in demand.

Looking ahead, the government and the RBI may need to consider alternate strategies to address the underlying issues in the gold market. Suggestions have emerged to revive the gold monetisation scheme to better mobilise idle household gold and alleviate demand pressures linked to high prices. Ongoing monitoring of buyer behaviour will be essential, as well as addressing liquidity constraints in the sector to ensure sustainable growth. The jewellery industry holds a significant place in India’s economy, and efforts to counteract the adverse effects of the duty hike should remain a priority to preserve consumer demand and support local jewellers.