India raises gold and silver import duties as rupee weakens

NEW DELHI: India has increased import duties on gold and silver as it seeks to support the rupee and protect foreign exchange reserves that have come under pressure during the war in the Middle East.

According to two official orders issued late on Tuesday, the government raised import taxes on the two precious metals to about 15 per cent from the existing 6pc, more than doubling the previous rate.

The move comes as India faces mounting external pressure linked to higher energy costs. The conflict in the Middle East and the closure of the Strait of Hormuz have disrupted energy supplies, adding to the burden on the country’s reserves. A fifth of the world’s crude had passed through the strait.

India, the world’s third-largest oil importer, has been hit hard by the jump in petroleum prices. Higher crude oil prices have pushed up the country’s import bill, placing further strain on its balance of payments and foreign exchange reserves.

Gold imports also weigh on reserves because they are paid for in dollars. That means buyers must either draw down foreign currency reserves or convert rupees to make purchases.

Government appeal amid pressure on currency

Prime Minister Narendra Modi had already urged the public days earlier to avoid buying gold for a year as the rupee’s decline against the dollar over the past year worsened during the Iran war.

Modi also appealed on Sunday for people in India to reduce petrol and diesel consumption in response to supply disruptions caused by the Middle East war.

The latest tariff increase reflects the importance of gold in India’s import basket and in household consumption. Gold is widely regarded as a sign of wealth and prosperity in the country and is commonly used during weddings and festivals.

After crude oil, gold ranks as India’s second-largest import, making changes in demand for the metal significant for the country’s external account position.

The government’s decision to sharply raise duties on gold and silver comes as it tries to contain pressure on the rupee while preserving foreign currency reserves already affected by rising energy costs and broader disruption linked to the conflict in the Middle East.