Gold imports surge in India: An explainer

What Happened

• India's gold imports reached an all-time high of USD 71.98 billion in FY 2025–26 — a 24% increase in value over the previous year — though the volume dipped marginally to 721 metric tonnes from 757 metric tonnes in FY 2024–25, with the value surge driven by gold's spot price rising from USD 76,617/kg (FY25) to USD 99,825/kg (FY26).
• India raised the basic customs duty on gold from 6% to 10% (total effective duty: 15%, including 5% Agriculture Infrastructure and Development Cess), reversing the duty reduction made in the Union Budget 2024; the revision has increased incentives for gold smuggling, according to industry officials.
• A surge in imports through the India-UAE CEPA route — where 180 metric tonnes per year are allowed at concessional duty — has expanded the UAE's share of India's gold imports from 7.9% (pre-CEPA) to 28% by 2025.
• The government has publicly appealed for restraint in gold purchases amid West Asia tensions that are elevating import costs, contributing to trade deficit pressure.
• Gold now accounts for over 9% of India's total merchandise imports, making it a structurally significant driver of the current account deficit.

Static Topic Bridges

Gold Imports and India's Current Account Deficit (CAD)

India's Current Account Deficit (CAD) represents the excess of total imports of goods and services (plus net income outflows) over total exports. India is structurally a current account deficit country, driven predominantly by its merchandise trade deficit — with petroleum and gold as the two largest import contributors. In FY 2025–26, India's goods trade deficit was pushed to historically high levels in certain months (e.g., October 2025 saw a deficit of USD 41.7 billion in a single month, up from USD 26.2 billion a year earlier), largely due to a gold import spike of ~200% year-on-year. For the full year FY2025–26, the CAD is estimated at 1.1–1.3% of GDP, but the gold surge elevates the risk of the CAD exceeding 2% of GDP in volatile quarters.

Customs Duty on Gold and Tariff Policy

Customs duty on gold is a key instrument through which India regulates gold import volumes and manages the trade deficit. The basic customs duty (BCD) on gold was cut from 15% to 6% in the Union Budget 2024 to curb smuggling and boost the gems and jewellery sector. This triggered a volume surge. The government subsequently raised the BCD back to 10%, taking the effective total rate to 15% (10% BCD + 5% Agriculture Infrastructure and Development Cess — AIDC). Trade analysts warn that at 15% effective duty on gold already trading at elevated USD 100,000/kg prices, the differential between official and unofficial import channels is wide enough to incentivise large-scale smuggling, historically a significant problem in India.

India-UAE CEPA and the Gold Import Channel

The India-UAE Comprehensive Economic Partnership Agreement (CEPA), in force since May 1, 2022, includes a Tariff Rate Quota (TRQ) for gold imports from the UAE at preferential (concessional) duty rates. This has made the UAE-India route extremely competitive for gold trading, resulting in the UAE's share of India's gold imports surging from 7.9% (pre-CEPA) to 28% by 2025, and annual value flows from USD 2.9 billion (2022) to USD 16.5 billion (2025). Critics argue that much of this represents re-exported gold (originally from Switzerland, South Africa, or Australia), effectively making the UAE a gold transshipment hub benefiting from the CEPA tariff differential.

Gold as an Asset Class and India's Cultural Demand Driver

India is the world's second-largest consumer of gold (after China), with annual demand consistently in the range of 700–900 metric tonnes. Demand is driven by: (1) jewellery (especially for weddings and festivals, accounting for ~60% of demand); (2) investment demand (gold ETFs, sovereign gold bonds, physical bars and coins); and (3) industrial/technological use (minor share). India meets nearly 100% of its gold demand through imports, as domestic mine production is negligible (less than 2 metric tonnes per year). Gold is also used as a hedge against inflation and currency depreciation — its price surge in FY26 is partly attributable to global safe-haven demand amid geopolitical tensions.

Key Facts & Data

• India's gold imports FY2025–26: USD 71.98 billion (all-time high, +24% YoY in value)
• Volume: 721 metric tonnes in FY26 vs 757 metric tonnes in FY25 (-4.76% by volume)
• Gold spot price FY26: ~USD 99,825/kg vs USD 76,617/kg in FY25
• Gold's share of India's total merchandise imports: >9%
• Current customs duty on gold: 10% BCD + 5% AIDC = 15% effective
• Union Budget 2024: temporarily reduced BCD to 6%
• India-UAE CEPA gold TRQ FY26: 180 metric tonnes at concessional duty
• UAE share of India's gold imports: ~28% in 2025 (up from 7.9% pre-CEPA)
• India is world's 2nd-largest gold consumer; ~100% import-dependent
• Sovereign Gold Bond scheme launched: 2015 (to channel savings into paper gold)
• CAD FY2025–26 estimate: 1.1–1.3% of GDP
• India's remittances H1 FY26: USD 38.2 billion (key current account offset)