Gold constitutes the second-biggest item in India's import bill after crude oil imports. (Representational Image/Magnific)Coming close on the heels of Prime Minister Narendra Modi’s call for the adoption of austerity measures, the government has hiked customs duty on gold and silver imports to 10% from 5%, and Agriculture Infrastructure and Development Cess (AIDC) to 5% from 1%, taking the total effective import duty to 15% with effect from May 13. The effective import duty on platinum has also been increased to 15.4% from 6.4%.On the trigger for the move, officials said it is a “carefully calibrated and proportionate intervention” to “encourage moderation in non-essential imports at a time when external vulnerabilities remain elevated”. “The government has increased the customs duty on imports of precious metals, including gold, gold dore, silver, silver dore, platinum, etc., as a policy measure aimed at safeguarding macroeconomic stability, conserving foreign exchange, and moderating non-essential imports during a period of heightened global uncertainty arising from the ongoing West Asia crisis,” an official said.The increase in customs duty on precious metals is intended to moderate avoidable import demand and ease pressure on the external account, the official added.The government has also increased import duty on gold and silver findings — small components such as hooks, clasps, clamps, pins and screws used to hold the whole or a part of a piece of jewellery in place — to 5%. Platinum findings will attract a 5.4% import duty.Impact on current account deficitGold constitutes the second-largest item in India’s import bill after crude oil imports. In FY26, the country’s gold imports jumped by 24.1% to $71.97 billion compared to $58 billion in the previous financial year. This was largely due to the rise in gold prices, with gold imports falling to 721.04 tonnes in FY26 from 757.09 tonnes in the previous financial year, as per data from the Ministry of Commerce and Industry. Gold prices have surged over 40% in the last year, inflating the import bill.Also in Explained | How India’s UAE gold trade deal may have made its import bill concerns worseThe current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes, officials said, adding that as a large importer of crude oil, India remains vulnerable to elevated energy prices and supply-side disruptions, which can increase the import bill, exert pressure on inflation, and the CAD.“In such circumstances, prudent management of the country’s external sector becomes essential. Historically, customs duty adjustments have been used as one of several policy instruments to support macro-economic stability and effectively manage CAD-related pressures during periods of global volatility,” the official said.Forex conservationStory continues below this adA depreciating rupee is also adding to the country’s import bill burden. Officials said precious metals, while culturally and financially significant, are “predominantly consumption and investment driven” in nature and that such imports involve “substantial outflow of foreign exchange”.“Precious metals occupy a unique position in the import basket because they involve significant foreign exchange outflows while being relatively less linked to productive industrial activity compared to sectors such as energy, manufacturing inputs, infrastructure, or technology,” the official said. India’s foreign exchange resources, therefore, must be prioritised towards essential imports such as crude oil, fertilisers, industrial raw materials, defence requirements, critical technologies, and capital goods, the official added. “These imports directly support economic activity, food security, infrastructure, manufacturing, exports, and national security,” the official said.NewsletterFollow our daily newsletter so you never miss anything important. On Wednesday, we answer readers' questions.SubscribeThe rupee hit an all-time low on Tuesday, falling to as much as 95.75 per dollar during the day before closing at 95.63 — the lowest it has ever ended a session. Since the war in West Asia began, the rupee has slumped by almost 5% against the US dollar and has been Asia’s worst-performing currency so far in 2026 — a period in which it has fallen by 6%.Over the last few years, India has seen significant foreign exchange outflows on account of higher gold imports and spending on overseas travel under the Liberalised Remittance Scheme (LRS). The pressure on India’s external sector has been felt amid the ongoing West Asia war, with forex reserves plummeting by $38 billion in just two months since the onset of the conflict, and crude oil prices continuing to hover above $100 a barrel.Story continues below this adThe fall in reserves to $691 billion has also been driven by sustained capital outflows from foreign institutional investors amid heightened global uncertainty. FII outflows in the January-May period were Rs 1.97 lakh crore as foreign investors continued their sell-off in the stock markets.Aanchal Magazine is a Deputy Associate Editor with The Indian Express, serving as a leading voice on the macroeconomy and fiscal policy. With 15 years of newsroom experience, she is recognized for her ability to decode complex economic data and government policy for a wider audience. Expertise & Focus Areas: Magazine’s reporting is rooted in "fiscal arithmetic" and economic science. Her work provides critical insights into the financial health of the nation, focusing on: Macroeconomic Policy: Detailed tracking of GDP growth, inflation trends, and central bank policy actions. Fiscal Metrics: Analysis of taxation, revenue collection, and government spending. Labour & Society: Reporting on labour trends and the intersection of economic policy with employment. Her expertise lies in interpreting high-frequency economic indicators to explain the broader trajectory of the Indian economy. Personal Interests: Beyond the world of finance and statistics, Aanchal maintains a deep personal interest in the history of her homeland, Kashmir. In her spare time, she reads extensively about the region's culture and traditions and works to map the complex journeys of displacement associated with it. Find all stories by Aanchal Magazine here ... Read More © The Indian Express Pvt LtdTags:Explained EconomicsExpress Explained