India has more than doubled tariffs on gold and silver imports to 15% from 6% in an effort to curb dollar demand and support the Indian Rupee (INR), according to Commerzbank strategists [1]. The move comes as strong bullion imports, which surged 146% year-on-year in Q1 2026 and now account for 14% of total imports, have widened the trade deficit and intensified competition for US dollars. This surge in imports was driven by a 60% year-on-year rise in global gold prices and a 161% increase in silver prices [1].
Despite the tariff hike, Commerzbank notes that gold demand in India is relatively price inelastic due to its cultural significance, suggesting the measure alone may not be sufficient to stabilize the INR. Instead, the tariff increase likely signals the beginning of a broader, coordinated effort to defend the currency [1]. Over the weekend, Prime Minister Narendra Modi called on citizens to reduce gold purchases, cut fuel consumption, and limit air travel to help preserve the Reserve Bank of India's (RBI) foreign exchange reserves, which fell 1.1% to USD 690.7 billion for the week ending 1 May [1].
In the foreign exchange market, USD/INR rose 0.1% to 95.72 yesterday, marking gains for the fourth consecutive session and remaining near its all-time high. The rupee's weakness is attributed to higher oil prices and continued net outflows, with foreign investors having sold a net USD 1.6 billion of equities so far this week [1].
CONCLUSION
India's decision to double tariffs on gold and silver imports is a significant step aimed at supporting the rupee amid surging bullion demand and widening trade deficits. However, analysts suggest that further measures may be necessary, as the cultural importance of gold in India limits the effectiveness of price-based interventions. The rupee remains under pressure due to persistent capital outflows and elevated commodity prices.