Grey Market Gold Rush: India's Tariff Hike Fuels Illicit Trade
India's decision to raise gold import tariffs to 15% has had an unexpected consequence: a surge in grey market activity. According to the World Gold Council (WGC), the higher duty, combined with 3% GST, has created an 18% price gap that has encouraged illegal gold trading.
The WGC reports that authorities have seized nearly double the amount of gold between May 13 and June 30 compared to the previous six-week period. Industry officials estimate that illegal imports could exceed 100 tonnes in 2026, up from a significant decline after earlier duty cuts.
India's net gold imports dropped 23% year-on-year to 98.1 tonnes in the June quarter, while overall gold demand declined 6% to 131.4 tonnes due to weaker jewellery purchases. However, investment demand remained strong, and the WGC expects consumer demand to recover if gold prices remain stable.
The grey market activity is negatively impacting organised jewellery businesses, which are struggling with the increased costs of imports.