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Case for customs duty hike on gold

G. CHANDRASHEKHAR, Advisor, ERTF

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In July 2024, the government sharply reduced the total customs duty on gold import from a high of 15% to 6% (comprising 5% basic customs duty and 1% agri infra development cess) providing a major boost to import of the yellow metal.

The precious metals trade hailed the move as a major reform, although there was no official justification for the duty reduction that involved huge revenue sacrifice.

That gold is a demerit commodity is well recognized. India spends enormous amounts of precious foreign exchange every year to import gold. From 678.3 tons worth US$ 35 Billion in 2022-23, imports surged to 748.3 tons valued at $ 42.6 Billion the following year, and then on to set a new record of $ 58 Billion (757 tons) in 2024-25, the result of duty reduction.

In the first six months of 2025-26, gold import totaled 300 tons worth $ 26.5 Billion.

Interestingly, and in a way shockingly, India’s gold imports in October 2025 surged to $ 14.7 billion, nearly tripling from $ 4.9 billion in October 2024.

It was said to be driven by high festive season demand amid record global prices. This massive spike (165 tons) contributed to a record monthly merchandise trade deficit of $ 41.7 billion and put considerable pressure on the Rupee.

Anecdotal reports suggest a contraction in physical demand for gold for jewelry. Weak demand has forced many jewelers to sell gold ornaments at a discount to current prices. The obvious demand destruction follows rising gold prices in the global market and a rapidly depreciating Rupee that makes import more expensive.

One estimate suggests approximately 30% of gold demand is for jewelry and related items while as much as 70% is ‘investment’ demand, a euphemism for speculative investment. In other words, the average middle-class families that buy gold jewelry have suffered because of high prices, while ‘investors’ have benefited by treating gold as a financial instrument.

The government must feel concerned about the ballooning trade deficit and currency depreciation contributed by massive import of less-essential goods like gold.

In the upcoming Union Budget 2026-27, it is imperative for the Finance Minister to consider strategies to contain the expanding trade deficit, stabilize the currency, and focus on Debt to GDP.

One way to achieve these multiple objectives would be to restore status quo ante as far as gold import duty is concerned. Hiking import duty on gold back to 15% would be an easy win for the government. It will help fill the coffers with additional revenue for the exchequer. As a major importer of gold, India must use its import power.

Of course, there would be opposition to the duty hike. One favourite argument is that higher duty would encourage smuggling. This is a specious argument because our border control, surveillance and anti-smuggling initiatives are far more modern and technology-driven than they were a few decades ago. ‘Smuggling’ is a bogey the trade raises often. Those who claim smuggling must be asked to prove it.

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JB Insights

The First Gold Story: How Gen Z Is Celebrating Their First Salary

By Mr. Hemant Chavaan
Head Of Marketing, E-Commerce and CRM At PNG Jewellers

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For previous generations, purchasing gold was often associated with weddings, festivals, and family investments. For Gen Z, however, the journey with gold is beginning much earlier. Across India, a growing number of young professionals are choosing to buy their first piece of gold jewellery with their first salary, transforming gold into a symbol of personal achievement, financial independence, and self-expression.

Hemant Chaavan, Head Of Marketing, E-Commerce and CRM At PNG Jewellers

This shift reflects a broader change in consumer attitudes. Today’s young buyers are not waiting for traditional milestones to own jewellery—they are creating milestones of their own.

Gold as a Reward for Success

Among Gen Z consumers, the first salary represents much more than a pay cheque. It symbolises years of hard work, education, and the beginning of financial freedom. Purchasing gold jewellery has become a meaningful way to celebrate this achievement.

Retailers are increasingly witnessing customers in the 22–25 age group choosing lightweight chains, rings, pendants, and bracelets that align with their first disposable incomes. Unlike earlier generations that viewed gold primarily as an investment, Gen Z seeks a balance between emotional value, personal style, and long-term worth.

Regional Trends Across India

Consumer motivations vary significantly across regions.

In Maharashtra and metropolitan cities, first-salary purchases are largely driven by self-reward and fashion, with young professionals opting for contemporary, lightweight jewellery suitable for both work and social occasions.

In Uttar Pradesh and Bihar, gold continues to carry strong cultural and aspirational significance, with many young buyers celebrating their first purchase as a proud family moment shared with parents and relatives.

Meanwhile, emerging urban centres across Madhya Pradesh reflect a blend of both behaviours, combining a preference for modern designs with an appreciation for the long-term value of precious metals.

The Rise of Lightweight Jewellery

The growing popularity of lightweight jewellery has played a crucial role in enabling this trend. Design-led collections in lower weight categories have made gold more accessible to first-time buyers, encouraging young consumers to experiment with multiple styles rather than investing in a single traditional piece.

A Relationship That Begins Early

Perhaps the most significant aspect of this shift is that it marks the beginning of a lifelong relationship with jewellery. Consumers who purchase gold with their first salary often return for future milestones, including weddings, anniversaries, gifting, and investments.

As Gen Z enters the workforce in larger numbers, the “first gold” moment is emerging as an important category in itself. It reflects a generation that values both individuality and financial prudence, proving that gold remains as relevant as ever—even as the motivations for buying it continue to evolve.

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