Global markets research firm Nomura expects more policy announcements in the coming weeks and months to follow Prime Minister Narendra Modi’s recent appeal to conserve energy and foreign exchange.  

These could include tighter rules under the Liberalized Remittance Scheme (LRS), which currently allows residents to freely remit up to $ 250,000 abroad annually and a diaspora bond to mobilise foreign currency deposits in addition to disincentivising non essential imports and a hike in petrol and diesel prices, Nomura analysts Sonal Varma and Aurodeep Nandi said in a note to investors.  

According to Nomura’s estimates, even though India imported $ 72billion (1.8% of GDP) worth of gold in FY26, the country’s overall imports of all precious metals combined (gold, silver, platinum, diamonds and pearls) have risen sharply to $105billion (2.7% of GDP) in FY26, from $ 81billion in FY25. It attributed the surge in imports to increase in precious metals prices in FY26 and the loopholes under select free trade agreements, which the government has tried to close over the past months.

“Historically, the effectiveness of gold import duty hikes in controlling imports has been mixed. When India raised duties to 10% in 2013, gold imports did decline initially, but gold smuggling increased to meet suppressed demand. More recently, the reduction of the duty to 6% was intended to curb smuggling and formalize the market. That said, as seen during 2013, authorities have many other levers to plug loopholes, if needed”, the analysts said.

The investor note points out that India's gold import duty has fluctuated over the past fifteen years. “Prior to 2013, the customs duty on gold stood at 2-4%, which was increased to 6% in January 2013 and eventually to ~10% during the "taper tantrum" crisis. The RBI had also implemented an 80:20 rule, under which designated agencies were allowed to import gold contingent upon 20% of the imports being exported. The gold import duty was recently lowered to 6%(comprising 5% basic customs duty plus 1% AIDC) in the July 2024 budget. The current hike back to 15% represents a return to levels last seen in 2022”, it said.

With the balance of payments tracking at a deficit of over $70billion in FY27 (according to Nomura estimates), the government move to increase customs duty on gold and silver is aimed at reducing gold and other precious metal imports and narrowing the current account deficit, they analysts said.