India’s gold jewellery trade is in open distress. The Gold Jewellery Association told CNBC Awaaz on Wednesday that buyer footfall has collapsed over the last 10 days — a demand freeze that is the product of three simultaneous shocks: Prime Minister Narendra Modi’s unprecedented public appeal to citizens to stop buying gold, the government’s doubling of import duties to 15%, and a global gold price at historic highs driven by the Iran war and rupee depreciation.
How it started: PM Modi’s appeal
On May 10, PM Modi urged Indian households to avoid buying gold jewellery for a year unless absolutely necessary, framing it as an act of national economic discipline against the backdrop of rising crude oil prices, a weakening rupee, and growing pressure on India’s current account deficit. He added that while there was no need to donate gold, citizens should avoid buying gold jewellery during ceremonies and events in the national interest, saying that saving foreign exchange was an important responsibility in the current situation.
The duty hike that followed
The next day, the government formalised the signal into policy — raising the Basic Customs Duty on gold from 5% to 10% and the Agriculture Infrastructure and Development Cess from 1% to 5%, taking the total effective import duty to 15%. According to the Global Trade Research Initiative, the total effective import levy on gold including 3% GST has now doubled from 9.18% to 18.45% — meaning a shipment previously attracting ₹9.18 in taxes per ₹100 of value now attracts ₹18.45.
The government also tightened rules for duty-free gold imports, fixing a maximum limit of 100 kilograms of gold per licence under the Advance Authorization scheme — changes that came into effect immediately.
What the numbers were already showing
The jewellery association’s distress call on Wednesday is consistent with a demand collapse that data had already begun to capture. India’s gold jewellery demand fell 19% year-on-year to 66.1 tonnes in Q1 2026 — one of the weakest first-quarter volumes in recent decades — as record-high prices weighed on affordability. Despite the volume drop, value demand rose 47% to ₹99,920 crore, driven by elevated prices. Gold imports had already collapsed well before the appeal — from approximately 100 tonnes in January 2026 to an estimated 15 tonnes in April 2026, described as a three-decade low outside of COVID.
For the first time on record, investment-led gold purchases exceeded jewellery consumption in India during the March quarter — investment demand rose 52% year-on-year to 82 tonnes while jewellery fell 19.5% to 66 tonnes. Indian consumers are still buying gold — just not as jewellery.
The wedding season wildcard
In the two days immediately following Modi’s appeal, bridal jewellery sales briefly surged 15–20% above average daily sales as some buyers rushed purchases ahead of weddings scheduled for later in the year. But the duty hike subsequently normalised that panic, with industry voices expecting volumes to dip 10–15% as a result of the customs duty increase.
Jewellery stocks already pricing in the damage
Markets moved fast to price in the demand destruction — Titan dropped as much as 8%, Kalyan Jewellers closed down 9.1%, and Senco Gold fell up to 12% intraday on May 11, suggesting investors are not betting on a demand surge. The Jefferies note flagged that the key overhang for the market is policy uncertainty — specifically whether the 15% duty is the end of tightening or the beginning of a sequence similar to 2013–15, when gold import restrictions were progressively tightened over two years before being unwound.
The institutional paradox
Even as PM Modi urged citizens to stop buying gold, the Reserve Bank of India has been moving in precisely the opposite direction — India’s sovereign gold holdings grew from 794.64 MT in September 2025 to 880.52 MT by March 2026, with gold’s share of total forex reserves rising from 13.92% to 16.7%. The state is accumulating what it is asking citizens to forgo — a contradiction that has not gone unnoticed in the trade.
This article is for informational purposes only and does not constitute investment advice. Please consult a qualified financial advisor before making any investment decisions.