Grey Market Gold Inflows Soar After India's Tariff Hike
India's move to increase import tariffs on gold has led to a surge in unofficial gold inflows, widening margins for grey-market operators and hurting organised players. The World Gold Council (WGC) said this rise in unofficial imports is due to the significant arbitrage opportunity created by the 15% duty plus 3% GST, resulting in an 18% difference.
Sachin Jain, chief executive of the WGC's Indian operations, stated that the arbitrage is 'huge' and almost spurs an entire industry. The government's attempt to curb demand and reduce the trade deficit has had the opposite effect, with grey market inflows causing disruption for organised players.
Enforcement agencies have seized nearly twice as much gold between May 13 and June 30 compared to April 1 and May 12, with seizures rising to 160.91 kg from 86.16 kg. This trend suggests that illegal imports could exceed 100 tons in 2026, according to industry officials.
The recent rise in unofficial gold inflows has led to a decline in net gold imports, which fell by 23% year-on-year to 98.1 tons in the June quarter. The WGC also reported that gold demand declined 6% from a year earlier to 131.4 tons, as falling jewellery purchases outweighed strong investment demand.