High Import Taxes Drive India's Informal Gold Trade

The Government of India has seen a resurgence in the shadow trade of bullion and jewelry as buyers increasingly use under-the-counter cash transactions to bypass high taxes. This trend follows a policy decision to more than double import levies on gold and silver to 15%, a move intended to reduce a trade deficit that reached nearly $32 billion in July.

In the unofficial market, bulk buyers can save up to 6% off market prices, while some retail customers secure discounts of up to ₹10,000 per 10 grams. Gold remains the largest imported commodity in India after oil, putting significant pressure on foreign-exchange reserves.

Prime Minister Narendra Modi has twice urged citizens over the last five months to avoid gold purchases to help conserve these reserves. Despite these appeals, the informal market is expected to expand further during the upcoming wedding and festival season, which runs from mid-October to early March.