India on Wednesday sharply increased customs duty on precious metals, including gold and silver, to reduce non-essential imports and protect foreign exchange reserves amid rising global uncertainty caused by the ongoing conflict in West Asia.

The government raised customs duty on gold and silver from 6% to 15%. It also increased duty on platinum from 6.4% to 15.4%.

Officials said the move aims to reduce pressure on India’s current account deficit and conserve foreign exchange for essential imports such as crude oil, fertilisers, defence equipment, industrial raw materials, and critical technologies.

Decision comes after PM Modi’s call for austerity

The duty hike came just days after Prime Minister Narendra Modi urged citizens to act cautiously during the ongoing global crisis. The Prime Minister asked people to avoid unnecessary foreign travel, buy local products, and help save foreign exchange for essential needs.

Experts now expect the government to introduce additional steps to control foreign exchange outflow. These may include stricter rules under the Liberalised Remittance Scheme (LRS).

Precious metal imports surged sharply

Imports of gold and silver have become a major burden on India’s foreign exchange spending. Government data showed that gold imports during 2025-26 jumped 24.08% compared to the previous year and reached $71.98 billion.

Silver imports rose even faster. They surged 149.48% to $12.05 billion. Despite this, India still holds foreign exchange reserves of more than $690 billion, enough to cover around 10 months of imports.

However, the government has adopted a cautious strategy because of continuing tensions in West Asia.

Rising oil prices increase pressure on economy

India depends heavily on imported crude oil. During 2025-26, the country imported nearly 88.7% of the crude oil it processed. India spent around $121.8 billion on oil imports.

Officials fear the oil import bill could rise significantly if the conflict in West Asia continues for a long period.

Since February, when the US and Israel attacked Iran, benchmark Brent crude prices have climbed nearly 48%, rising from $72.87 per barrel to $107.77.

Government says move will protect macroeconomic stability

A government official said the decision aims to protect the broader economy during a period of global instability.

The official said the duty increase is meant for “safeguarding macroeconomic stability, conserving foreign exchange, and moderating non-essential imports during a period of heightened global uncertainty” linked to the West Asia crisis.

According to a finance ministry notification, the revised import duties also apply to products such as gold and silver ore and coins.

Officials warn of global volatility

Government officials said the geopolitical situation has increased uncertainty in global oil markets and international shipping routes.

“The current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes. As a large importer of crude oil, India remains vulnerable to elevated energy prices and supply-side disruptions, which can increase the import bill, exert pressure on inflation, and the current account deficit (CAD). In such circumstances, prudent management of the country’s external sector becomes essential,” the official said.

Officials added that governments have historically used customs duty changes to manage economic stability during global crises.

Foreign exchange to focus on essential imports

The government said India must prioritise foreign exchange reserves for essential sectors. These include crude oil, fertilisers, industrial raw materials, capital goods, defence requirements, infrastructure, exports, manufacturing, and food security. Officials said policymakers often shift resources toward strategically important sectors during periods of global uncertainty.

“In periods of heightened geopolitical and commodity-market volatility, policymakers often seek to prioritise external resources towards areas with higher strategic and economic multiplier effects. Therefore, during periods of external stress, measured moderation of discretionary imports may contribute significantly to overall macro-economic stability and prudent external-sector management.”

Government says measure is not anti-consumer

Officials clarified that the higher customs duty does not amount to a ban on precious metal imports. They described the move as a balanced and temporary measure aimed at reducing avoidable imports.

“The increase in customs duty on precious metals is intended to moderate avoidable import demand and ease pressure on the external account. The measure is neither prohibitory nor anti-consumer in nature. It is a carefully calibrated and proportionate intervention designed to encourage moderation in non-essential imports at a time when external vulnerabilities remain elevated,” the official said.

Experts warn of possible rise in smuggling

Some experts warned that the sharp rise in customs duty could encourage smuggling activities, especially in gold. India has previously witnessed increases in illegal gold smuggling whenever import duties rose sharply.

Government links move to economic discipline

Officials also connected the decision to the broader economic discipline campaign promoted by Prime Minister Modi.

“The measure is also aligned with the broader national economic discipline emphasised by the Prime Minister in the context of the evolving global situation. Citizens have been urged to reduce avoidable foreign expenditure, promote domestic alternatives, conserve fuel, and support national economic resilience through responsible consumption choices. In this broader context, moderation in discretionary precious metal imports may be viewed as part of a wider collective effort to strengthen economic stability during a period of uncertainty,” the official said.

Duty rates changed earlier during stable conditions

Officials pointed out that customs duties on precious metals have changed regularly depending on India’s economic condition. When foreign exchange reserves improved and economic pressure eased, the government reduced import duties.

A recent example came in the Union Budget 2024-25, when India reduced customs duty on gold and silver from 15% to 6% and platinum duty from 15.4% to 6.4% because the economy was in a more stable position at the time.