Key facts
- India's gold import tariffs were more than doubled to 15% in May.
- The tariff increase is expected to fuel a resurgence in gold smuggling.
- Smuggling volumes could exceed 100 tonnes this year.
- Higher grey market margins enable smugglers to undercut legitimate channels.
India's decision to more than double its gold import tariffs to 15% in May has inadvertently spurred a significant increase in smuggling. Industry officials and bullion dealers estimate that over 100 tonnes of gold could be smuggled into the country this year. The higher tariffs were implemented to curb domestic demand, reduce the nation's trade deficit, and alleviate pressure on the rupee. However, the move has created a lucrative grey market, where smugglers can offer the precious metal at prices that undercut legitimate banks and refiners due to increased margins. This surge in illicit trade highlights the unintended consequences of protectionist trade policies on market dynamics.