India's Gold Market Hit by Smuggling Surge After 15% Duty Hike
India's gold market is facing a surge in smuggling activity following a 15% hike in import duties to 5% in May 2026. This policy shift has created a large price gap, with illicit gold now trading at discounts of up to ₹8,000 per 10 grams compared to official prices.
The grey market is hurting tax-paying jewellery retailers and distorting official demand figures, creating a challenge for investors tracking consumer and retail stocks. The government reports indicate that net gold imports dropped 23% year-on-year to 98.1 tonnes during the June 2026 quarter, but industry analysts caution that this decline may not reflect a drop in overall gold consumption.
Historically, there is a clear correlation between elevated import duties and the rise of illicit supply chains. Trade bodies, including the All India Gem & Jewellery Domestic Council, are actively lobbying for a reduction in import duties to 5% to help narrow the price gap and disincentivize the grey market.