India's gold imports: How it impacts our economy | An explainer

India's gold imports rose 24 percent to an all-time high of USD 71.98 billion in 2025-26, up from USD 58 billion in 2024-25, driven overwhelmingly by a sharp...

What Happened

India's gold imports rose 24 percent to an all-time high of USD 71.98 billion in 2025-26, up from USD 58 billion in 2024-25, driven overwhelmingly by a sharp rise in global gold prices rather than increased volume — import volumes actually dipped 4.76 percent to 721 tonnes.
The unit value of gold imported rose from USD 76,617 per kilogram in 2024-25 to USD 99,825 per kilogram in 2025-26, reflecting a global safe-haven surge in gold prices amid geopolitical uncertainty.
The surge in gold imports was a key factor in widening India's overall merchandise trade deficit to USD 333.2 billion in 2025-26.
The India-UAE Comprehensive Economic Partnership Agreement (CEPA), combined with a sharp import duty reduction announced in the Union Budget 2024-25, significantly boosted gold imports through the Dubai channel — Dubai's share in India's gold imports rose from 7.9 percent before the CEPA to 28 percent by 2025.
Amid concerns about the West Asia conflict worsening India's external account, the government initiated a review of gold trade policy; calls for austerity in gold purchases were made at the highest levels to reduce pressure on the rupee and foreign exchange reserves.

Static Topic Bridges

Current Account Deficit (CAD) and Its Components

The Current Account Deficit (CAD) represents the shortfall in a country's foreign exchange earnings from trade in goods, services, and primary/secondary income relative to its spending. India's CAD is structurally driven by its merchandise trade deficit — principally crude oil and gold imports — partially offset by a substantial services surplus (IT, BPO) and remittance inflows. A CAD of above 2.5–3 percent of GDP is considered a zone of concern for India, as it signals greater dependence on potentially volatile capital inflows to finance the gap.

India's CAD for April–December 2025: USD 30.1 billion (1.0 percent of GDP), down from USD 36.6 billion (1.3 percent of GDP) in the same period a year earlier.
Q3 FY26 CAD stood at USD 13.2 billion (1.3 percent of GDP), widening from USD 11.3 billion in Q3 FY25.
Gold is India's second-largest import category after crude oil.
India received remittances of USD 135.4 billion in FY 2024-25 — the world's largest remittance recipient — which partially offsets the trade deficit in the current account.

Connection to this news: Gold imports at USD 71.98 billion were a primary driver of the merchandise trade deficit widening to USD 333.2 billion in FY26. Any further surge — driven by price or volume — directly worsens the CAD and intensifies pressure on the rupee and forex reserves.

India-UAE Comprehensive Economic Partnership Agreement (CEPA)

The India-UAE CEPA, signed on 18 February 2022 and operationalised from 1 May 2022, was India's first bilateral free trade agreement in over a decade. It provides for duty elimination or reduction on approximately 97 percent of tariff lines on a phased basis. For gold, the CEPA established a Tariff Rate Quota (TRQ) mechanism under which a fixed volume of gold can be imported from the UAE at a concessional duty of 1 percent (versus the standard rate). The FY 2025-26 TRQ gold quota was set at 180 tonnes.

India-UAE CEPA signed: 18 February 2022; operationalised: 1 May 2022.
Gold TRQ quota for FY 2025-26: 180 tonnes at a concessional 1 percent duty.
Dubai's share in India's gold imports: 7.9 percent before CEPA → 28 percent by 2025.
India's gold bar imports from UAE rose from USD 2.9 billion (2022) to USD 16.5 billion (2025).

Connection to this news: The combination of the CEPA concessional rate and the 2024 budget duty cut made gold routed through Dubai significantly cheaper to import, contributing to the structural shift in India's gold import sourcing and amplifying the total import value surge.

India's Gold Import Duty Framework

India levies a basic customs duty (BCD) on gold imports, historically used as a tool to moderate import demand and protect foreign exchange. In the Union Budget 2024-25, the government sharply cut the BCD on gold from 15 percent to 6 percent and on gold doré (semi-processed gold) from 14.35 percent to 5.35 percent — the sharpest single-year reduction in over a decade and the lowest level since June 2013. The duty cut was intended to formalise the gold trade, reduce smuggling, and lower jewellery costs for consumers, but had the unintended macroeconomic consequence of encouraging a surge in imports.

BCD on gold pre-Budget 2024: 15 percent; post-Budget 2024: 6 percent.
BCD on gold doré: reduced from 14.35 percent to 5.35 percent (effective 24 July 2024).
India International Bullion Exchange (IIBX) at GIFT City, Gujarat: established as the designated gateway for institutional gold imports.
The IIBX was set up under the IFSCA (International Financial Services Centres Authority) Act 2019.

Connection to this news: The 2024 duty cut — intended to curb smuggling — significantly lowered the effective import cost of gold, contributing to the 24 percent value surge seen in FY 2025-26. This has prompted a policy rethink, with calls to reverse the concessional rates in the CEPA channel or reimpose higher duties.

Foreign Exchange Reserves and Import Cover

India's foreign exchange (forex) reserves are held by the Reserve Bank of India and comprise foreign currency assets (FCAs), gold holdings, Special Drawing Rights (SDRs), and the Reserve Tranche Position at the IMF. Forex reserves serve as a buffer to defend the rupee, meet import obligations, and service external debt. The adequacy of reserves is conventionally measured by "import cover" — the number of months of imports the reserves can finance without any inflows.

India's forex reserves peaked at USD 728.5 billion in February 2026.
Forex reserves fell to approximately USD 690.7 billion by May 2026 — a decline of nearly USD 38 billion in approximately two months.
Import cover: approximately 10–11 months as of May 2026.
The Greenspan-Guidotti rule recommends reserves sufficient to cover one year's short-term external debt obligations.

Connection to this news: Every dollar spent on gold imports is a dollar of foreign exchange consumed. At USD 72 billion annually, gold imports alone consume a significant portion of India's annual goods export earnings, and the ongoing reserves decline — driven partly by the gold import bill and OMC-related dollar demand — makes the gold import surge a live policy concern.

Key Facts & Data

India's gold imports FY 2025-26: USD 71.98 billion — all-time high (up 24 percent from USD 58 billion in FY25).
Import volume: 721.03 tonnes in FY26, down 4.76 percent from 757.09 tonnes in FY25 — price-driven surge, not volume-driven.
Unit price: USD 99,825 per kg (FY26) vs. USD 76,617 per kg (FY25).
Merchandise trade deficit FY26: USD 333.2 billion.
India-UAE CEPA TRQ for gold: 180 tonnes at 1 percent duty (FY 2025-26).
BCD on gold cut from 15 percent to 6 percent in Union Budget 2024-25 (effective 24 July 2024).
Dubai's share in India's gold imports: 28 percent (up from 7.9 percent pre-CEPA).
India's forex reserves: USD 690.7 billion (May 2026), down from USD 728.5 billion peak (February 2026).
India is the world's second-largest gold consumer and one of the top two importers globally.