Mirae Asset believes higher import duty could widen India-global bullion price gap

India’s sharp increase in import duty on gold and silver, along with tighter restrictions on silver imports, could distort domestic bullion prices and widen the gap with global rates, according to a note by Mirae Asset Mutual Fund.

The fund house said the recent hike in customs duty on gold and silver from 6% to 15%, effective May 13, has already pushed up domestic prices even as international rates remained largely stable. India imports nearly all of its gold and a substantial share of its silver requirements, making local prices highly sensitive to import costs and currency movements.

The report highlighted that gold prices in India rose sharply after the duty revision. Gold priced at ₹1.52 lakh per 10 grams on May 12 increased to about ₹1.64 lakh per 10 grams on May 13, primarily because customs duty per kilogram jumped from ₹8.31 lakh to ₹20.78 lakh.

Silver prices also reacted immediately. The note said MCX gold and silver prices surged 6-8% after the announcement, reflecting the pass-through of higher import costs into domestic markets.

Separately, the government’s move on May 16 to place silver bar imports

under the “restricted” category may create supply concerns for silver exchange-traded funds (ETFs), the report said.

Since silver ETFs require LBMA-certified physical silver for every new unit issued, restrictions on imports could tighten availability if approvals are delayed.

Mirae Asset noted that discounts in silver ETFs have already narrowed between May 15 and May 18. Domestic silver discounts reduced from about ₹11,840 per kg to ₹5,000 per kg during the period, indicating tightening supply conditions.

The report also flagged the possibility of domestic bullion prices decoupling from global trends if import restrictions intensify. While lower Indian demand could eventually weigh on international prices, domestic supply shortages may initially push local prices higher through elevated premiums.

India remains one of the world’s largest consumers of precious metals.

According to the report, the country accounts for roughly 25-27% of global jewellery demand for gold and as much as 35-45% of global bars and coins demand for silver.

Drawing parallels with the 2013 gold import curbs, including the “80:20 rule”, the report said restrictive measures had previously led to domestic shortages, higher premiums and a rise in smuggling, even as official imports declined sharply.

During that period, domestic gold prices climbed from around ₹26,500 per 10 grams to ₹34,500 per 10 grams amid supply constraints.

The fund house said the current measures are aimed at conserving foreign exchange reserves and supporting the rupee during a period of elevated crude oil prices and currency weakness. However, it cautioned that the cumulative impact of supply restrictions, changing demand patterns and ETF flows remains difficult to predict.

According to the report, the immediate effect may be higher domestic premiums and tighter discounts, while over the longer term weaker Indian demand could exert downward pressure on global bullion prices.