Illegal gold imports into India recorded a sharp rise during the July-September quarter, escalating by more than 1,500% compared to the same period last year. According to a report by the World Gold Council (WGC), which cited data from the consultancy Metals Focus, informal gold shipments climbed to 50 metric tons in the third quarter, up from only 3 metric tons in the corresponding period a year earlier. This represents the highest level of such activity since 2023.
The surge in unofficial inflows is largely attributed to recent adjustments in government policy regarding precious metals. Earlier this year, the central government increased import duties on gold and silver to 15%. This fiscal measure was primarily designed to manage the country's widening trade deficit and curb excessive gold purchases amid elevated global energy prices. However, the WGC noted that such increases in import taxes have historically incentivized traders to bypass official channels.
Informal imports generally enter the domestic market through smuggling or are brought in by individuals in small, undeclared quantities. By avoiding the 15% import duty, these goods can be sold at lower rates, though often through undocumented or cash-based transactions. This shift toward the informal market also encourages under-the-counter dealings within the local jewellery trade, where items are frequently sold without formal invoices, complicating efforts by authorities to track movement and ensure transparency in the bullion market.
India remains the world's second-largest consumer of gold, a commodity that carries profound cultural and financial weight in the country. Domestic production is limited, forcing the nation to rely heavily on imports to satisfy demand for jewellery, gifts, and long-term household savings. Purchases are traditionally concentrated around weddings, religious ceremonies, and major festivals such as Diwali, making gold a staple of Indian economic activity.
Despite the rise in unofficial imports, the WGC report indicated that overall gold demand—encompassing both jewellery and investment purchases—has shown signs of cooling compared to the previous year. While demand typically strengthens during the October-December window, there is growing industry concern that the anticipated festive and wedding season recovery may be weaker than originally projected.
Market sentiment is currently being influenced by a notable correction in gold prices. In October, prices fell by 6.8%, slipping below the $4,000-per-ounce threshold. According to the country's largest precious metal refiner, jewellers are currently exercising caution in their procurement processes, anticipating that this downward price trend may continue. This wait-and-watch approach from professional buyers, combined with the general economic climate, continues to shape the domestic market's outlook for the remainder of the year.
The growth of the informal gold trade presents a persistent challenge for domestic policy, as the government continues to weigh the need for tax revenue against the realities of domestic demand. As authorities monitor the situation, the impact of these duty hikes remains a focal point for the bullion industry, particularly as stakeholders adjust to the evolving price landscape and the increasing prevalence of grey market shipments.
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