The Centre’s decision to raise gold import duty from 6 per cent to 15 per cent has revived concerns over a possible surge in gold smuggling, as higher duties historically make illegal imports more profitable in India. The move follows Prime Minister Narendra Modi’s recent appeal urging citizens to avoid buying gold for a year amid rising pressure on the country’s import bill due to elevated crude oil prices and geopolitical tensions in the Middle East.

The government’s decision restores import duty levels to those last seen in 2022 and is aimed at curbing non-essential imports and reducing pressure on foreign exchange reserves. India is one of the world’s largest consumers of gold, and heavy imports significantly impact the country’s trade deficit. However, experts and enforcement agencies have repeatedly warned that steep increases in import duty tend to widen the price gap between legal and illegal gold, creating strong incentives for smuggling networks.

According to the Directorate of Revenue Intelligence, higher duties on imported gold have consistently contributed to a rise in illegal inflows of the precious metal. In its official assessments, the agency has stated that increasing import costs directly incentivises smuggling activity. The DRI has observed that smugglers attempt to exploit demand in the domestic market when officially imported gold becomes significantly more expensive.

Also Read: Stock Market Investors Eye Global Cues Before May 14 Opening Bell

Recent data highlights the sharp rise in smuggling activity over the past few years despite enhanced airport security and surveillance systems. Airports accounted for nearly 43.7 per cent of gold smuggling cases in FY25, while over 55 per cent of smuggling routes reportedly involved land borders. In FY22, India recorded roughly two airport-related gold smuggling cases per day with average daily seizures of about 0.4 kilograms. By FY24, daily smuggling cases at airports had surged to around 16, with average daily seizures exceeding 10 kilograms.

Officials and analysts say the combination of rising global gold prices and higher import taxes increases the profitability of illegal trade networks. Smugglers often use concealed carriers, international transit routes and land-border channels to evade customs duties. Enforcement agencies have intensified monitoring at airports and border checkpoints, but the scale and sophistication of operations continue to pose challenges for authorities.

The latest duty hike comes at a time when the government is trying to balance economic stability, currency pressures and import management. While higher duties may help contain official gold imports and support foreign exchange reserves, economists caution that prolonged high taxation without parallel enforcement measures could strengthen illegal supply chains and revive large-scale smuggling operations across the country.

Also Read: SEBI Finds Ex-Religare Chair Rashmi Saluja Guilty of Insider Trading, Orders Rs 2 Crore Payback