Jewellery Shares Drop on Gold Import Duty Concerns

Indian Prime Minister Narendra Modi’s call to avoid gold purchases for a year to help protect foreign exchange reserves fueled concerns of higher import tariffs on the metal, sending shares of Indian jewelry retailers lower. 

The Iran war has sent oil prices surging and that in turn has resulted in mounting pressure on India’s balance of payments and the rupee. India is the world’s third-largest oil importer and consumer, meeting more than 90 percent of its crude oil needs and about half of its natural gas demand through imports.

Modi’s remarks about gold on Sunday came along with a range of other measures he urged, including fuel conservation, increasing working from home and limits on travel and imports.

Gold is in high demand in India, particularly for weddings where gold jewelry is seen as a crucial part of a bride’s attire and is a popular gift from family and friends. While it is the world’s second-largest gold consumer, India relies on imports to meet nearly all of its demand.

Shares of jewelry makers such as Titan, Senco Gold and Kalyan Jewelers fell between 6 percent and 9 percent on Monday. “There are concerns that the government might sharply increase import duty on gold for a year to discourage imports,” said Surendra Mehta, national secretary at the India Bullion and Jewelers Association.

“Duties could be raised even higher than levels seen in recent years.” Modi on Sunday also urged the people of India to cut down on petrol and diesel consumption amid supply disruptions due to the Middle East war.

India is one of few countries in the region that has not increased prices of petrol and diesel for domestic consumers or rationed supplies.

But it has increased prices of liquefied petroleum gas (LPG) a primary cooking fuel in the country after disruptions following the US-Zionist entity strikes on Iran, which led to Iran’s near-total blockade of the strategic Strait of Hormuz.

“We have to reduce our use of petrol and diesel. In cities with metro lines, we should try to travel by metro...If we must use a car, then we should try to car pool,” Modi said Sunday, addressing a gathering in southern Telangana state. He added that restrictions on use were also necessary to save foreign currency spent on fuel imports.

“We must also place a strong emphasis on saving foreign exchange, as petrol and diesel have become so expensive globally.” Modi also urged people to resume energy-saving schemes that were in place during the COVID pandemic.

“We should prioritize work from home, online conferences, and virtual meetings again,” he said. Hardeep Singh Puri, India’s minister for petroleum and natural gas, said oil marketing companies (OMCs) had taken a hit on their revenues while ensuring “uninterrupted energy imports and supply.” “OMCs are buying crude, gas and LPG at higher cost, but in order to protect consumers, they are selling final products at lower cost leading to massive mounting losses of upto 1,000 crore rupees (approximately $120 million) per day,” Puri said Sunday on X.

He added that losses for the government, after reducing taxes on diesel and petrol for domestic consumption, “saw revenue losses of 14,000 crore rupees (approximately $1.6 billion) in a month.”

He urged citizens to turn Modi’s “empathetic appeal” into a mass movement “to save and conserve energy.” In 2012 and 2013, New Delhi hiked tariffs on gold imports to stabilize a rapidly depreciating rupee.

Now, jewelers fear that duty cuts made in 2024 to 6 percent from 15 percent to curb smuggling could soon be reversed. A government source said on Monday, however, that India has no plans to raise duties on gold and silver imports.

India’s balance of payments is expected to deteriorate sharply this April-March fiscal year to a deficit of about $66 billion to $70 billion, compared with an estimated $26 billion to $28 billion in 2025-26. Pressure on the rupee has prompted the central bank to sell the dollar and limit the size of trading positions that banks can take. It has also clamped down on arbitrage trades.