Politics
Is PM Modi’s appeal working? Gold demand falls 70% after tariff hike, rising costs
India’s gold demand has fallen about 70% since the government more than doubled import duties earlier this month, the Economic Times reported Saturday, citing industry and jeweler estimates that highlighted rising prices, rising costs of living and Prime Minister Narendra Modi’s call for voluntary austerity.
Demand fell to around 7.5 tonnes in the fortnight ended May 27, from around 25 tonnes a year earlier, the report said. This reduction follows the government’s decision to increase import duties on gold from 6% to 15%, with effect from May 13.
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“Reports from jewelers across India show that there has been a 70 per cent drop in demand after the increase in import duties,” Surendra Mehta, national secretary of the Indian Bullion and Jewelers Association (IBJA), told ET. “Unorganized trade, which accounts for 65% of gold trade, has been worst hit due to hike in customs duties.”
The slowdown comes weeks after Prime Minister Narendra Modi urged citizens to adopt voluntary austerity measures in response to economic pressures resulting from the Iran-Israel-US conflict. Suggestions included a one-year pause in gold purchases to conserve foreign exchange and reduce pressure on the economy.
Jewelers say the prime minister’s message has boosted already low consumer confidence.
“It’s not just high import duties that have dampened demand,” said Joy Alukkas, president of jewelry retailer Joyalukkas. “The Prime Minister’s call to stay away from gold for a year has also had a huge impact on consumer confidence.”
Joyalukkas sees demand falling by more than 35 percent, the president said, adding that he is not sure if it will fall even further.
Industry executives also cited rising fuel and food prices as a factor in the decline.
Following the increase in customs duties, the effective tax burden on gold, including GST, increased from 9.18% to 18.45%. The government increased customs duties amid a weak rupee, high crude oil prices and geopolitical tensions, while tightening import rules and capping duty-free imports under the prior authorization system.
“Right now, gold is not on the priority list of consumers,” Mehta said. “Also, now is the Adhik Maas period, where Hindus generally avoid buying anything valuable. What is more surprising is that the investment demand for gold has slowed down.”
This weakness is visible even in southern India, traditionally one of the country’s largest gold-consuming regions.
“Consumers are not stretching their budgets,” said B Govindan, chairman of Bhima Jewellery. “They buy whatever fits their budget and therefore choose lightweight, low-carat jewelry.”
He added that many consumers are moving in the opposite direction. “On the contrary, there is a huge rush among consumers to sell old gold and bring money home.”
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Sources 2/ https://www.businesstoday.in/personal-finance/news/story/pm-modis-appeal-working-gold-demand-drops-70-after-duty-hike-rising-costs-534132-2026-05-31 The mention sources can contact us to remove/changing this article |
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