Despite a steep hike in the gold import duty, India's gold imports rose by 34 per cent year-on-year to USD 3.41 billion in May, driven by high prices of the precious metal; at the same time, silver imports took a plunge of 86.65 per cent during the month, according to the commerce ministry data. Silver imports dipped to USD 75.57 million during the said period, compared with USD 566.22 million in the same month last year (May 2025).

Earlier, the government increased import duty on gold from 6 per cent to 15 per cent, effective May 13. The move was announced to avoid further pressure on the Indian currency--the rupee-- to maintain the trade deficit. Prime Minister Narendra Modi has also appealed to citizens to hold off buying gold for a year. However, these measures did not stop imports of precious metals.

Hit On Trade Balance

The country's trade deficit widened to $28.21 billion in May as gold imports surged. The price of the precious metal in the capital was around Rs 1.60 lakh per 10 grams (inclusive of all taxes). Silver was priced at around Rs 2.60 lakh per kg. The largest source of gold imports is Switzerland, which accounts for around 40 per cent of total imports. It is followed by the United Arab Emirates (over 16 per cent) and South Africa (around 10 per cent).

Total gold imports from Switzerland fell by 57.73 per cent in May and by 20.34 per cent in the first two months of the 2026-27 fiscal year. The precious metal accounts for more than 5 per cent of the country's total imports. Gold imports increased by 60.14 per cent to $9.04 billion in April-May of the 2026-27 fiscal year, while silver imports declined by around 33 per cent to $486.58 million.

Gold Imports Were at a Record High Last Fiscal

Gold imports rose 24 per cent to an all-time high of USD 71.98 billion in the previous fiscal year 2025-26. However, imports by volume declined 4.76 per cent to 721.03 tonnes. India is the world's second-largest consumer of gold after China. These imports primarily meet the needs of the jewellery industry.

These imports impact India's current account deficit (CAD)

According to the Reserve Bank of India, India's current account surplus was USD 7.1 billion, or 0.7 per cent of GDP, in the January-March quarter of fiscal year 2025-26. This surplus increased to USD 13.7 billion, or 1.4 per cent of GDP, in the fourth quarter of fiscal year 2024-25. However, the current account deficit for the full fiscal year was USD 25.2 billion, or 0.6 per cent of GDP, while for fiscal year 2024-25, the deficit was USD 22.9 billion, or 0.6 per cent of GDP.

A current account deficit (CAD) occurs when a country's imports of goods and services and other payments exceed its exports of goods and services and other receipts over a given period of time.

(With Inputs From PTI)