Industry Odisha Bureau, Sep 10: Legitimate gold dealers across India are facing new pricing pressure. Smuggled gold is reportedly undercutting official prices substantially. Industry executives report discounts reaching up to ₹8,000 per 10 grams. That gap traces back to a steep import-duty increase.
Gold import duty rose to 15% from 6% in May. This shift widened the space between legal and illegal pricing. Higher duties raise costs for anyone importing through official channels. Gold entering outside those channels can undercut that pricing structure.
This dynamic isn’t unique to the current moment. Economists at the World Gold Council have long tracked this pattern. Wider domestic-international price gaps tend to strengthen smuggling incentives. Higher duties don’t cause smuggling alone, but they add fuel.
India has seen this play out before. A four-percentage-point duty hike hit in early 2013. Unofficial imports were modest then, around 10 tonnes quarterly. By early 2014, that figure had jumped to roughly 70 tonnes. That’s nearly a sevenfold increase within just one year.
Even after duties settled near 10% through much of the decade, illegal flows never disappeared. Between late 2013 and mid-2019, unofficial imports averaged about 34 tonnes per quarter. That persistence suggests smuggling networks, once built, don’t simply fade away.
A similar sequence unfolded more recently. Effective gold duty climbed to 15% in July 2022. It had stood at 10.75% before that increase. Unofficial imports were near 17 tonnes that same quarter. By year’s end, they had risen to roughly 50 tonnes. Elevated illegal flows continued well into 2023.
Now, industry estimates suggest history could repeat itself. More than 100 tonnes could enter India illegally this year alone. That figure comes from market participants, not official government data.
Enforcement agencies aren’t standing still, though. The Directorate of Revenue Intelligence has intensified its response recently. Intelligence-led operations have targeted organised smuggling networks nationwide. Government data released July 25 detailed recent enforcement results. Agents seized more than 27 kilograms of foreign-origin smuggled gold. Twelve individuals were arrested in connection with these operations.
Still, seizures of that scale represent a small fraction. They don’t come close to matching estimated illegal inflows overall.
For legitimate dealers, the economics are straightforward and painful. Gold moving through official channels carries duties and compliance costs. Smuggled gold often escapes both, enabling steep undercutting. That undercutting squeezes margins for compliant bullion traders and jewellers alike.
Industry voices have started pushing back through policy channels. Rajesh Rokde, who chairs the All India Gem & Jewellery Domestic Council, has proposed a different approach. He argues duty hikes hurt organised trade more than they help. Rokde has suggested cutting gold duty to as low as 5%. He frames this as a way to boost exports instead.
That remains an industry proposal, not government policy. Whether officials revisit duty levels remains genuinely uncertain.
What history does show clearly is the underlying tension. Import policy and price arbitrage are deeply, mechanically connected. Every duty decision carries consequences for how gold actually moves.
