Demand fell to about 7.5 tonnes in the fortnight ended May 27 from around 25 tonnes a year earlier, according to industry estimates. The government increased the import duty on gold to 15% from 6% with effect from May 13.
“Reports trickling in from jewellers across India shows that there has been a 70% drop in demand after the import duty was hiked,” said Surendra Mehta, national secretary of India Bullion & Jewellers Association (IBJA). “The unorganised trade, which comprises 65% of the gold trade, has been worst hit due to the duty hike.”
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Joy Alukkas, chairman of gold jewellery retail chain Joyalukkas, attributed the demand weakness to several factors. “It is not only the high import duty that has dented the demand,” he said. “The Prime Minister’s appeal to stay away from gold for a year has also impacted consumer sentiment in a big way. At Joyalukkas, we are seeing demand dropping by more than 35%. We are not sure whether it will slip further.”
Mehta at IBJA said apart from the gold import duty hike, higher petrol and diesel prices and food items are also weighing on consumer sentiment “as they are not willing to spend on gold now”.
The effective tax burden on gold, including goods and services tax (GST), has risen to 18.45% from 9.18% after the duty increase. The government raised duties against the backdrop of a weak rupee, elevated crude prices, and geopolitical tensions, while also tightening import rules and capping duty-free imports under the Advance Authorisation Scheme.”At present, gold is not in the priority list of consumers,” said Mehta. “Moreover, it is now the period of Adhik Maas, when Hindus generally avoid buying anything precious. What is more surprising is that the investment demand for gold has slowed down.”
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The slump may weigh on investment demand in the second quarter of 2026 after a strong start to the year, said jewellers.
Gold Exchange Schemes Take Off
India’s bar and coin demand rose 34% from a year ago to 62.3 tonnes in the March quarter.
India consumes about 800-850 tonnes of gold annually. On Friday, gold of 999 purity traded at about ₹1.57 lakh per 10 grams, excluding GST, in Mumbai’s spot market.
Volumes are weak in south India, traditionally one of the country’s biggest gold-consuming markets. Some consumers are also shifting towards lighter and lower-carat jewellery while sales of old gold have risen sharply, according to jewellers. “Consumers are not stretching their budgets,” said B Govindan, chairman of Bhima Jewellery. “They are buying whatever fits their budget and therefore choosing lightweight and lower-carat jewellery. On the contrary, there is a huge rush among consumers to sell old gold and take cash back home.”
Industry executives noted the varied impact of the import duty increase across segments, with many retailers indicating a pause in procurement. “Large chain stores saw a brief period of panic buying after the announcement, driven by expectations of further measures, and while they expect a slowdown in sales, they remain relatively resilient given inventory buffers and continued support from bridal demand,” said Kavita Chacko, research head at the World Gold Council (WGC).
Mid-sized and regional jewellers are continuing to see demand from affluent customers but are expected to rely more on gold exchange programmes and tighter inventory cycles going forward, she said. “Smaller retailers appear the most vulnerable: already stretched by persistently high prices, they now face added pressure from sales volumes and profit margins,” said Chacko.