Gold Prices May Drop Before Festive Season as Government Considers Slashing Import Duty from 15% to 6%

Ahead of the upcoming festive season, the government is deliberating a reduction in import duties on gold and silver, which could lower retail rates by over Rs 12,000 per 10 grams.

Right before the onset of the festive shopping period, gold prices in the domestic market have broken previous benchmarks to hit unprecedented highs. With physical demand expected to surge in the coming weeks, the central government is evaluating a proposal to reduce import duties on gold and silver to prevent further price spikes. Earlier this year, on May 13, 2026, the government had raised the customs duty on precious metals to 15 percent to curb surging imports. However, escalating illegal trade and market pressure have prompted policy managers to reconsider this high-tariff stance.

Smuggling Surge and Bullion Industry Demands
Following the tariff hike on precious metals, unauthorized channels and illegal smuggling have expanded significantly across the country. Traders attempting to bypass the heavy tax burden have created distortions that affect formal retail pricing. Although a final cabinet directive is yet to be announced, expectations are building that the government will deliver tax relief ahead of the festival season. Industry associations representing bullion dealers and retail jewelers have been continuously pressing for the import tariff to be restored to 6 percent from its current 15 percent level.

Foreign Exchange Pressures and the May Tariff Decision
The policy decision executed on May 13, 2026, raising tariffs from 6 percent to 15 percent, was aimed at relieving pressure on foreign exchange reserves while managing elevated crude oil import expenditures. Immediately following the tariff escalation, domestic consumer demand registered a visible decline, which helped contain foreign currency outflows. While international spot prices experienced a period of consolidation around that time, domestic retail rates have recently trended upward toward Rs 1.65 lakh per 10 grams. This relentless surge has prompted the government to assess duty cuts to lessen the financial burden on household buyers.

India's Import Footprint and Jewelry Export Dynamics
India maintains its position as the world's premier gold importer, bringing in approximately 800 tonnes of gold annually. The domestic processing sector also exports significant volumes of crafted gold jewelry to key global destinations, including the UAE, Thailand, and Singapore. Elevating import tariffs on bullion directly inflates the cost structure of exported ornaments, making Indian products less competitive in overseas markets. Concurrently, high domestic duties encourage illicit cross-border movement of gold while raising consumer costs for both gold and silver in local markets.

Detailed Breakdown of Import Growth Trends
Trade metrics from early 2026 show extreme volatility in import volumes. In April 2026, gold imports spiked by 82 percent year-on-year, imposing severe strain on trade balance metrics. In response to the widening deficit, PM Narendra Modi publicly requested citizens to moderate their bullion purchases throughout the year. Following the May tariff increase, import growth slowed to 34 percent. During the subsequent two-month period of June and July, gold imports grew by 5.5 percent to reach $6.13 billion, compared to $5.81 billion recorded during the corresponding period of the previous year.

Mathematical Impact: Lucknow Retail Price Analysis
Under the existing 15 percent duty regime, importing gold worth Rs 1,00,000 incurs a tariff fee of Rs 15,000, bringing the base landing cost to Rs 1.15 lakh. Reducing the import duty rate back down to 6 percent yields a net tax reduction of 9 percentage points. In Lucknow, retail rates for 24-carat gold stood at Rs 1,63,750 per 10 grams on Wednesday, August 26, 2026. A full 9 percent tariff concession would lower the price by Rs 12,815 per 10 grams to Rs 1,50,935 per 10 grams, marking a 7.83 percent price reduction for retail buyers.

What this means for you
Across India: If the government slashes the import duty by 9%, buyers planning gold and silver purchases for the upcoming festive season could save around Rs 12,815 per 10 grams.

In Lucknow: In the local Lucknow bullion market, 24-carat gold prices could drop from Rs 1,63,750 to Rs 1,50,935 per 10 grams, bringing significant relief to shoppers.

Questions & Answers

1. By how much is the government considering reducing the gold import duty?
The government is deliberating a reduction in import duty on gold and silver from the current 15 percent down to 6 percent.

2. How much will 10 grams of gold cost in Lucknow if the duty is reduced?
In Lucknow, where 24-carat gold was priced at Rs 1,63,750 per 10 grams on August 26, 2026, a 9 percent duty cut could lower the price to Rs 1,50,935 per 10 grams.

3. Why was the gold import duty raised in May 2026?
The duty was increased to 15 percent on May 13, 2026, to protect foreign exchange reserves and offset rising expenditure on crude oil imports.

4. How much gold does India import annually?
India is the world's largest gold importer, bringing in approximately 800 tonnes of bullion every year.

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