For India’s policymakers, stabilising an extremely vulnerable rupee means targeting the country’s deepest economic romance. Following a rare appeal from Prime Minister Narendra Modi urging citizens to voluntarily halt their gold purchases for a year, the government codified the request by hiking import duties from 6 per cent to 15 per cent.
The two-step intervention reflects a calculated gamble to shield foreign exchange reserves and insulate the currency from external energy shocks, even if it means putting a steep premium on the nation’s darling safe haven.
The obsession runs deep and in trillions of dollars. Over generations, Indians’ relentless consumption of the yellow metal has accumulated into a vast stockpile dispersed across the country. India is the world’s second-biggest consumer of gold, surpassed only by China, importing roughly 600 to 800 tonnes of the precious metal every year, as per a Bloomberg report.
Morgan Stanley estimates Indian households hold around 34,600 tonnes of the metal — rings, bangles, necklaces, bars — tucked into lockers, temple vaults and ancestral trunks from Mumbai to Kolkata. At current international prices, that would equate to a staggering $5.2 trillion.
India’s obsession with gold
For all the government’s efforts to cool the country’s appetite for bullion, India’s relationship with gold remains more emotional than economic.
As one Delhi customer bluntly told Swastik Jewels owner Nitin Gupta: “15% duty hai, par beti ki shaadi ek hi baar hogi.”
That single sentence captures the tug-of-war now playing out between policy and tradition. The question is whether even the country’s most powerful political voice can loosen gold’s centuries-old grip on Indian households.
The early answer appears to be a classic Indian compromise: Yes, but not really.
PM Modi may command political influence, but market experts believe even his appeal to curb bullion buying to protect the rupee and contain India’s swelling import bill is unlikely to dent long-term demand in a meaningful way.
Because in India, gold is rarely just gold.
Nikunj Saraf, CEO of Choice Wealth, calls it part of the country’s “cultural architecture”, woven into weddings, festivals, family prestige and generational wealth transfers so deeply that no public advisory can easily melt it down.
In fact, the market reacted with a touch of irony. Soon after the Prime Minister’s appeal, bridal jewellery sales reportedly jumped 15-20% above daily averages as consumers rushed to buy before anticipating tighter curbs or even higher prices later. In trying to cool demand, the message briefly added more fuel to the fire.
Still, the government’s nudge may not be entirely without effect.
Surendra Mehta, National Secretary of the India Bullion and Jewellers Association (IBJA), believes demand could eventually soften by 10-12%, largely because of the Prime Minister’s “massive fan following.” But instead of abandoning gold altogether, consumers are expected to adapt to the Indian way, lighter jewellery, lower purity and smarter buying rather than giving up the tradition itself.
And where sentiment refuses to bend, simple maths may eventually step in.
The government’s decision to more than double import duties to 15% has made gold significantly more expensive across the supply chain, from bullion dealers to bridal families.
Are Indians still buying?
The recent hike in import duty on gold is expected to weigh on jewellery demand, which was already under pressure from record-high bullion prices. As per a recent report by Crisil, the Indian organised gold jewellery retail sector, comprising jewellery, coins and bars, is expected to see sales volume decline a further 13-15% on-year this fiscal, after an 8% contraction last fiscal, due to high prices and recent policy measures to curb imports.
Himank Sharma, Director at Crisil Ratings, said jewellers have seen an immediate slowdown in customer activity.
“As an immediate impact, gold jewellers have seen reduced footfalls and sales in the last 3-4 days. However, we anticipate that the overall revenue profile of retailers will improve, driven by a significant increase in realisations on average on a year,” Sharma said.
Retailers on the ground are seeing a similar pattern. A sharp but temporary wobble rather than a lasting retreat.
Senco Gold and Diamonds MD and CEO Suvankar Sen told ET Online that consumers initially turned cautious after the duty hike, unsure whether elevated prices would sustain.
“Since the duty hike, I think consumers were a little apprehensive. They were not sure whether prices would be sustainable or not. But now that the prices have come down, we are seeing footfalls increasing again,” Sen said.
The initial reaction, however, was hard to miss.
“After the price hike, for the first two to four days, footfalls had dropped by almost 25-30%,” he said, adding that demand is now gradually recovering.
“People are just waiting for the right time to buy for the wedding season. People are assuming that a crisis can come in and gold and silver prices can go up anytime. So I think people are just waiting, and it will be a good season overall. We just need to wait for this Iran war to end. The moment it ends, sentiments will become super positive.”
The pressure is even more visible among smaller jewellers, where every walk-in matters. At Delhi-based Swastik Jewels, owner Gupta said footfalls have fallen by nearly 25% since the duty hike. Yet, fewer customers have not necessarily translated into weaker demand. Instead, the crowd has simply become more serious.
“After April 1, we saw only around 70-75 walk-ins, but nearly 80% were serious buyers,” Gupta said. “The 15% duty and news around banks halting imports created urgency. People who postponed purchases in March came back in April fearing another hike.”
That urgency helped offset the fall in store traffic. Gupta said overall sales volumes in April remained broadly flat compared with March, even though casual browsing dropped sharply. “Casual buyers exited, but need-based buyers rushed in,” he added.
What has changed more visibly is the way Indians are now buying gold. According to Gupta, the higher import duty effectively reset gold prices overnight, forcing customers to rethink budgets rather than abandon purchases altogether.
The 15% duty reset the base price nearly ₹4,500 per 10 grams higher overnight, Gupta stated. “For May-June weddings, we are seeing three clear reactions.”
The first trend is that pre-booked wedding demand has remained largely protected from the shock. “Nearly 60% of our June wedding orders were booked in March at the earlier 5% duty rates, and those orders will be honoured,” he said.
The second shift is visible in fresh bridal purchases, where families are trimming weight and lowering purity to stay within budget. “New bridal enquiries are now asking for 45-50 gram sets instead of 80 grams earlier. The shift from 22K to 18K is real, and the average ticket size has come down by nearly ₹1.2 lakh.”
The third concern is now moving toward the festive season. Gupta believes that if the 15% duty remains in place, Diwali buying could become more symbolic than extravagant. “Smaller purchases like 5-gram coins and light pendants may dominate, while heavy buying could shift to next year or move towards Sovereign Gold Bonds,” he said.
All said, gold is currently juggling a lot of moving parts. The Prime Minister’s appeal reflects broader macroeconomic considerations, particularly around imports and the current account, Sunil Katke, Head of Commodities Retail Business, Kotak Securities, told ET Online. While some investment-led demand could temporarily slow, India’s cultural affinity toward gold is extremely strong and deeply embedded in weddings, festivals, and household savings behaviour, he added. “In our view, consumers may moderate volumes or shift toward lower weight purchases, but a complete pause in buying is unlikely.”
