Budget 2026 Keeps Gold Import Duty Unchanged Amid Trade Balance Concerns

The Union Budget 2026, presented on Sunday by Finance Minister Nirmala Sitharaman, left import duties on gold unchanged, despite lingering concerns over surging gold inflows and their implications for India’s external balances.

By maintaining the existing duty structure, the government signalled that it does not currently view tariff intervention as necessary to rein in gold imports. Officials suggested that the present framework strikes a balance between revenue generation, domestic consumption needs, and the interests of the jewellery and bullion industry.

The Finance Ministry noted that the decision reflects a cautious approach, prioritising close monitoring of external sector pressures over sudden tax adjustments. This stance is particularly relevant at a time when global gold prices remain elevated, and import trends are largely shaped by international market forces rather than domestic policy levers.

Why Gold Imports Matter?

The Economic Survey 2025–26 reported a 27.4% year-on-year increase in gold imports in FY25, underlining the metal’s enduring appeal among Indian consumers even amid record-high global prices.

Gold continues to be a major component of India’s import bill, alongside crude oil and petroleum products. Together, these items account for more than a third of total imports. Unlike energy imports, however, gold is considered largely non-essential and tends to see heightened inflows during periods of global uncertainty, amplifying pressure on the trade balance.

Implications for Trade and the Current Account

The Survey warned that rising gold imports at a time of elevated international prices have added to strains on India’s current account deficit (CAD). While higher prices have inflated the import bill in value terms, resilient domestic demand has prevented a meaningful slowdown in import volumes.

Elevated global risk aversion, driven by geopolitical tensions, trade disruptions, and expectations of negative real interest rates, has pushed investors worldwide toward safe-haven assets such as gold, reinforcing demand in India as well.

Gold’s Expanding Role at Home

The Survey also pointed to a sharp rise in loans backed by gold jewellery, suggesting that households are increasingly leveraging their holdings as prices climb. While this trend has supported credit expansion, particularly in personal lending and MSME finance, it has also deepened gold’s role in the domestic economy, with growing spillovers for India’s external sector.

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