India’s Gold Imports Fall Sharply After Duty Hike: Kotak

New Delhi, Sep 25 (KNN) India’s reported gold imports have declined sharply since May 2026 following an increase in import duties, according to Kotak Institutional Equities.

In a September 23 strategy report, Kotak said the decline in official gold imports could be due to three factors: lower household demand after the duty increase, consumers postponing purchases in anticipation of a possible duty cut, or a shift towards unofficial import channels,The business standard reported.

Gold imports during the first five months of FY27 stood at USD 17.5 billion, compared with USD 16.9 billion in the corresponding period of FY26. Kotak has estimated FY27 gold imports at USD 88 billion, against USD 72 billion in FY26.

Gold import duties were increased from May 13, 2026. The total import duty rose to 15percent  from 6percent , with basic customs duty increasing to 10percent  from 5percent  and the Agriculture Infrastructure and Development Cess rising to 5percent  from 1percent .

Including GST, Kotak estimated that the effective duty and GST incidence on imported gold increased to 18.5percent  from 9.2percent . The brokerage estimated that the higher duty increased domestic gold prices by around 9percent  relative to global prices.

Kotak said lower official gold imports could reduce pressure on India’s current account deficit and balance of payments. However, it noted that a shift to unofficial channels could reduce customs and GST collections without a corresponding decline in underlying gold demand.

"The sharp decline in monthly gold imports from May 2026 may reflect higher import duties on gold from May 13, 2026, which resulted in a 9percent  increase in domestic gold prices relative to global gold prices and/or stable global and domestic gold prices, which may have reduced the investment appeal of gold for households; we note the sharp increase in inflows into gold ETFs on rising gold prices in 2HCY25 and the sharp drop in inflows into gold ETFs on declining gold prices since February 2026, as a good indicator of household behavior linked to trailing returns of an asset class," said Kotak.

On the possibility of households postponing purchases, Kotak said "The sharp decline in monthly gold imports from May 2026 may simply reflect a temporary slowdown in gold purchases by Indian households, as they (1) digest the one-time increase in domestic gold prices from higher import duties and (2) fear cut in import gold duties that may result in a loss on recently-purchased gold. Gold imports may recover to ‘normal’ levels if the government was to cut import duties. We have seen similar lulls and jumps following import duty rate changes in the past," Kotak said in its report.

Kotak also said India’s current account deficit is estimated at 1.2percent  of GDP in FY27, assuming an average crude oil price of USD 85 per barrel. It identified gold import levels as a risk to this estimate.

The brokerage has proposed a taxation structure involving higher GST and lower import duties on gold, which it said could affect imports, recycling and government revenue.

(KNN Bureau)