India’s Gold Imports Plunge to a 20-Year Low Amid Record Prices

Introduction

India, the world’s second-largest gold consumer, is witnessing an unprecedented drop in gold imports. In February 2025, imports are expected to plummet by 85% compared to the previous year, marking the lowest level in two decades. This decline is primarily driven by record-high gold prices, which have deterred both retail and wholesale buyers, even during the peak wedding season.

The drop in demand comes at a time when India’s economy is grappling with inflationary pressures, shifting consumer priorities away from gold investments. This blog explores the factors behind the decline, its impact on the economy, and potential trends for the coming months.

Key Reasons Behind the Sharp Decline in Gold Imports

1. Record-High Gold Prices

Gold prices have surged to all-time highs, making it increasingly difficult for Indian consumers to afford large-scale gold purchases. With the price per gram surpassing historic benchmarks, traditional buyers—especially from rural India—are delaying or reducing purchases.

2. Weak Rupee & High Import Duties

A weakening Indian rupee has further increased gold’s landed cost. Additionally, the government’s import duty of 15% (including GST and customs duty) makes it even more expensive for buyers.

3. Government Policies & Crackdown on Gold Smuggling

Recent crackdowns on illegal gold imports and stricter compliance with GST regulations have limited alternative avenues for procuring gold. This has further contributed to the steep decline in official gold imports.

4. Changing Consumer Behavior

Indians are increasingly diversifying their investments into digital gold, sovereign gold bonds, and other financial instruments. The younger generation is favoring these alternatives over physical gold, which affects traditional demand patterns.

5. Inflation & Economic Slowdown

With inflation eating into disposable income, many households are prioritizing essential spending over luxury purchases like gold. Despite the wedding season—historically a peak period for gold demand—many families are opting for lightweight jewelry or postponing purchases.

Economic Impact of Declining Gold Imports

1. Trade Deficit Reduction

India imports a significant portion of its gold, contributing to a high trade deficit. The current decline in gold imports may help narrow the trade deficit, benefiting the country’s current account balance.

2. Impact on the Jewelry Industry

Gold jewelers and retailers are experiencing a slowdown in sales, prompting discounts and promotional offers to revive demand. Many small and medium jewelers are struggling to sustain margins amid high raw material costs.

3. Rise in Digital Gold & Alternative Investments

The shift toward digital gold and sovereign gold bonds (SGBs) is evident. More consumers are choosing paper gold over physical purchases, aligning with government efforts to reduce gold imports.

What’s Next for Gold Demand in India?

Despite the current slowdown, analysts believe that demand may recover in the coming months due to potential price corrections, festive season demand (Akshaya Tritiya, Diwali), and easing inflation pressures.

However, a further increase in gold prices or additional policy measures from the government could sustain the import decline in the long term.