“Looking at 2026 as a whole, we estimate that combined jewellery and bar and coin demand could decline by around 50-60 tonnes, around 10 per cent lower than the previous year, due to the impact of the import duty hike,” WGC said in its India gold market update.
The gold import duty was raised sharply from 6 per cent to 15 per cent, making it the single-largest increase on record and fully reversing the duty cut of July 2024. The Prime Minister has also appealed to consumers to avoid buying gold for a year.
Also read: High gold prices, import duty hike to drag jewellery demand: Crisil
Other factors, such as the gold price, changes to income levels, inflation, or effects from the monsoon, would further influence annual demand, it added.
“Our econometric models suggest that changes in import duties tend to impact gold demand in both the short and long term, although the impact differs across jewellery and investment products such as bars and coins. Investment demand appears more sensitive to duty changes, while jewellery demand has shown greater resilience,” said WGC.
WGC said jewellery consumption is influenced more by prices and inflation, and import duties have less of an impact.This is likely because jewellery purchases are often required, particularly for weddings and social occasions, said WGC.
Investment demand, on the other hand, is linked to income levels and import duties, with higher duties and restrictions tending to weigh on demand, it said, adding that in the short term, factors such as inflation and rainfall also influence investment demand alongside taxes.
Further, WGC said import data points to a consistent relationship between higher import duties and the inflow of unofficial gold.
Between 2013 and 2026, increases in import duty were mostly followed by higher levels of unofficial or smuggled gold, while duty reductions coincided with sharp declines in such inflows.
Following the 4 per cent duty hike in 2013, unofficial imports increased sharply from around 10 tonnes in the first quarter of that year to 70 tonnes by the same period of 2014, a seven-fold increase in under a year.
Even when duties were steady at 10 per cent through the second half of 2013 until the second quarter of 2019, unofficial inflows remained elevated, averaging 34 tonnes per quarter, suggesting that once smuggling networks are established, they are difficult to unravel.
A similar pattern was observed after duty was hiked from 10.75 per cent to 15 per cent in July 2022.
Unofficial imports rose from 17 tonnes in the second quarter of 2022 to nearly 50 tonnes by late that year and stayed elevated through much of 2023.
However, after the duty was cut to 6 per cent in July 2024, unofficial imports fell almost immediately to near zero, added WGC.