India hikes bullion import duties as the world's second-largest gold market faces a declining rupee

India, the world's second-largest gold consumer, has raised import duties on gold and silver to 15% from 6%, just days after Prime Minister Narendra Modi urged citizens to curb bullion purchases for a year as overseas purchases pressure the rupee.

The government has imposed a 10% basic customs duty and a 5% tax on gold and silver imports, as per notifications issued on Wednesday.

India's average monthly gold import rose to 83 tonnes in the first two months of 2026 from an average 53 tonnes in 2025, according to a World Gold Council report released last month.

"This was largely supported by strong investment demand during January," the report said. In value terms, India's gold demand nearly doubled year on year during the first quarter of 2026, to a record of $25 billion, as per the report.

But this demand for gold inflates the country's import bill, which has already been increasing due to rising global energy prices and the disruptions in the Middle East.

India is a net importer of goods, and it ran a merchandise trade deficit of more than $330 billion in the financial year ending March 2026, up from over $280 billion a year ago.

Gold and silver were nearly 11% of India's total imports, while crude and petroleum products accounted for 22%.

"Lower gold imports can indeed help lower current account outflows for India, as gold import outlays are substantial," Vishrut Rana, Asia-Pacific economist at S&P Global Ratings, told CNBC in an email. But added that "energy costs are still front and center, and while these are elevated, we expect pressure on the rupee will persist."

The South Asian country imports nearly 85% of its fuel needs and relied on the Strait of Hormuz for about 50% of its crude imports before the war, 60% of its liquefied natural gas, and almost all of its liquefied petroleum gas (LPG) supplies.

Higher energy costs are expected to significantly widen the country's trade deficit and current account deficit. These concerns have led to the weakening of the rupee against the dollar, sending it to record lows in recent days.

"India is backtracking on liberalization of the market, which investors like about India," Trinh Nguyen, senior economist at Natixis, told CNBC's "Inside India" on Wednesday.

The country has not raised fuel prices at the pump, which would lead to "demand destruction," instead, it is raising import duties and shifting away from liberalizing the economy, Nguyen added

On Monday, Modi appealed to Indians to use public transport, work from home, and carpool to conserve fuel. This makes India the latest to join a growing number of Asian countries encouraging lower fuel consumption as energy costs climb amid tensions in the Middle East.