In a recent development, the Indian government has hiked import duty on gold and silver, along with the Agriculture Infrastructure and Development Cess (AIDC), to 15% and 5% respectively, effective from May 13. This move comes in the wake of Prime Minister Narendra Modi's call for austerity measures and the ongoing geopolitical tensions in West Asia. The government aims to conserve foreign exchange reserves and secure the external account, which has been under pressure due to the war and rising oil prices. The rupee has weakened by 11% against the US dollar over the last year, and foreign portfolio investors have withdrawn approximately $22.5 billion from Indian financial markets in 2026. The government's decision to increase import duties on gold and silver is a strategic move to stabilize the capital account and prevent further rupee depreciation. The import duty on gold has been raised from 5% to 10%, while the duty on silver findings has been increased from 1% to 5%. This decision reflects the government's efforts to manage the country's external sector stability and reduce the import bill, which has been significantly impacted by the rise in gold prices and the depreciation of the rupee. The government's focus on conserving foreign exchange reserves and attracting foreign investment inflows is evident in these measures. The hike in import duties on gold and silver is a significant step towards achieving these objectives and maintaining the country's economic stability in the face of global challenges.
