India's higher gold tariffs spur smuggling and sharp price drop

India more than doubled its gold import tariff to 15% in May to curb demand, reduce the trade deficit and support the rupee. The higher duty has created a lucrative grey‑market, with discounts exceeding US$200 per ounce (over 4%). Dealers say smugglers can undercut banks and refiners, and illegal imports could surpass 100 tonnes in 2026, implying a loss of roughly US$2.65 billion in tariffs and sales tax.

Retail gold prices reacted sharply. In Chennai the price of an 8‑gram sovereign fell by Rs 1,040 to Rs 1,12,560 (≈57% higher than a year earlier), while the per‑gram price dropped to Rs 14,070. Silver prices remained unchanged at Rs 270 per gram.