India’s long romance with gold has entered an awkward new phase. On May 13th 2026, the government raised import duties on gold to 10% from 5%, while increasing the agriculture infrastructure and development cess to 5% from 1%, citing the need to curb imports and protect foreign-exchange reserves amid the escalating West Asia crisis. The move came days after Prime Minister Narendra Modi urged Indians to postpone buying gold for a year and reduce fuel consumption in the national interest.
The appeal touches a raw nerve in a country where gold is not merely consumed, but culturally embedded. Indians do not buy gold simply to wear it. They inherit it, mortgage it, gift it, recycle it and treat it as an informal insurance policy against uncertainty. India imports between 700 and 900 tonnes annually, making it one of the world’s largest gold consumers and a persistent drain on foreign exchange reserves. Yet the government’s latest intervention signals a broader shift in thinking. Policymakers increasingly appear to view India’s gold problem not as one of sentiment, but of economic structure.
A cultural asset meets a macroeconomic constraint
For decades, India’s policymakers have grappled with an uncomfortable contradiction: gold is economically inconvenient but politically untouchable. Attempts to suppress demand have historically backfired. The Gold Control Act of 1963, which restricted the possession and sale of higher-purity gold, merely drove the trade underground and accelerated smuggling.
Industry leaders fear history may repeat itself. “Jewellery is deeply embedded in India’s customs, traditions and culture,” says Dr Pratap Madhukar Kamath, managing director of Abaran Timeless Jewellery. “Gold, particularly in tier-2 towns and rural India, remains a form of financial security. Bangles, chains and rings are not merely adornments—they are part of stridhan, passed down through generations and held as a safeguard in times of uncertainty.”
Kamath argues that repeated increases in customs duties tend to produce unintended consequences. “History has shown that prohibitive measures do not work effectively,” he says, pointing to the experience of the Gold Control Act. Higher duties, he warns, risk reviving smuggling networks whenever the gap widens between legal and illicit supply channels.
Gem & Jewellery Export Promotion Council (GJEPC), the industry’s apex trade body, struck a more conciliatory tone after the duty hike, publicly aligning itself with Modi’s “Nation First” appeal while cautioning against the consequences of punitive taxation.
Kirit Bhansali, chairman of the council, said the industry had already convened leading retailers and manufacturers to formulate voluntary measures aimed at reducing dependence on imported gold. These include promoting lower-carat jewellery such as 14-karat and 9-karat products, encouraging consumers to exchange old gold for new jewellery, discouraging investment-led purchases of bars and coins, and reviving India’s underperforming Gold Monetisation Scheme.
“India already possesses nearly 25,000 tonnes of household gold stock,” Bhansali said in a statement issued by the council. “If even a fraction of this inactive gold can be responsibly brought back into circulation, the country can reduce incremental dependence on imported gold without disrupting cultural traditions or consumer aspirations.”
At the same time, Bhansali reiterated the council’s long-standing opposition to sharp import-duty increases. “Hiking import duties rarely curbs gold imports—it merely inflates prices,” he warned, arguing that previous duty hikes had historically encouraged smuggling while raising costs for exporters and manufacturers.
The council also warned that the policy would disproportionately affect smaller manufacturers. MSMEs account for roughly 80% of GJEPC’s membership and are already grappling with severe liquidity pressures, as nominated agencies demand bank guarantees worth ₹28-30 lakh per kilogram for duty-free gold imports, effectively locking up working capital in an already strained export environment.
Rather than relying solely on import restrictions, the organisation urged policymakers to pursue structural reforms that would reduce dependence on imported bullion without damaging the broader jewellery economy.
The industry’s counterproposal: recycle, don’t restrict
Despite concerns over import duties, the industry is not openly resisting the Prime Minister’s appeal. Instead, jewellers are attempting to position themselves as partners in economic management rather than defenders of consumption.
That balancing act is increasingly visible in the rhetoric emerging from India’s jewellery sector. “Prime Minister Narendra Modi’s appeal to reduce gold buying for a year should be understood in the broader national economic context,” says Manoj Jha, managing director of Kamakhya Jewels. “India is facing global uncertainty, rising geopolitical tensions, pressure on foreign-exchange reserves and elevated import bills.”
Jha argues that India’s jewellery trade cannot be treated as a discretionary luxury industry. “It is one of the country’s largest employment generators, supporting millions of livelihoods—from karigars and craftsmen to retailers, transporters, designers and MSMEs,” he says.
Jha argues that India’s jewellery trade cannot be treated as a discretionary luxury industry. “It is one of the country’s largest employment generators, supporting millions of livelihoods—from karigars and craftsmen to retailers, transporters, designers and MSMEs,” he says.
Instead of suppressing jewellery consumption altogether, Jha believes policymakers should focus on speculative bullion demand. According to industry estimates, roughly 200 to 250 tonnes of annual imports are absorbed by bars, coins and investment channels rather than jewellery manufacturing.
“If the objective is to reduce forex outflow, policy attention should focus more on speculative bullion accumulation than traditional jewellery demand linked to weddings, festivals and household savings,” he says. That distinction is becoming central to the industry’s defence.
The monetisation gamble
The most ambitious response has come from Kalyan Jewellers, which unveiled its “Nation First – Gold4India Initiative” shortly after Modi’s remarks. The programme aims to reduce imports by encouraging consumers to exchange, monetise and recirculate idle household gold.
India is estimated to hold more than 25,000 tonnes of privately owned gold, much of it lying dormant in lockers and family vaults. T.S. Kalyanaraman, managing director of the Thrissur-based jeweller, argues that India must begin treating gold less as a static store of wealth and more as a renewable domestic resource.
“If even a fraction of this inactive gold can be responsibly brought back into circulation, India can potentially reduce incremental dependence on imported gold without disrupting consumer aspirations or cultural traditions,” he says.
The initiative includes exchange schemes for old jewellery, dedicated monetisation counters and grassroots awareness campaigns through Kalyan’s retail network. It also seeks to encourage wider adoption of 18-karat jewellery, which uses less pure gold than the traditional 22-karat products dominant in India.
The proposal reflects a broader shift underway across the industry: from encouraging gold accumulation to encouraging gold circulation. That trend is already visible at the retail level. According to Kamath, between 50% and 60% of jewellery purchases now involve consumers exchanging old gold rather than buying freshly sourced material.
For the government, the challenge is ultimately political as much as economic. Gold occupies a uniquely sensitive place in Indian society. Asking citizens to buy less of it risks sounding not merely like a call for restraint, but a request for cultural compromise.
Yet India’s macroeconomic arithmetic is becoming harder to ignore. With geopolitical tensions driving commodity volatility and external balances under pressure, policymakers appear increasingly willing to test whether patriotism can temporarily override consumption.
The jewellery industry, for its part, is trying to ensure that if India buys less gold, it does not buy less jewellery. That may prove to be the compromise on which the sector’s future now depends.