India’s bullion market is being skewed by a sharp rise in smuggled gold, driven largely by the May 2026 hike in import duty to 15%, which has made the grey market significantly cheaper than legal channels and squeezed legitimate dealers and jewellers.

Market distortion and price gap

• Smuggled gold is now selling at discounts of up to Rs 8,000 per 10 grams compared with official prices, creating a wide arbitrage that undercuts compliant traders.
• Industry executives warn that this price gap is a clear signal of an active grey market, disadvantaging genuine bullion dealers and organised jewellers who pay full duty and taxes.

Scale of illegal inflows

• Industry estimates suggest more than 100 tonnes of gold could enter India through illegal channels in 2026, echoing past surges in smuggling after earlier duty hikes.
• Despite the higher tariff, India’s gold import bill rose 24% to a record $71.9 billion in FY26, even as physical volumes fell to about 721 tonnes, indicating persistent demand being met partly via unofficial routes.

Enforcement response

• Revenue intelligence agencies, particularly the Directorate of Revenue Intelligence (DRI), have intensified operations against organised smuggling networks using airports, land borders, coastal routes and domestic road transport