India Raises Gold Import Tax to 15% to Protect Record-Low Indian Rupee

The Indian government has dramatically increased import taxes on gold and silver from 6% to 15% in a high-stakes bid to halt the rapid devaluation of the rupee and protect dwindling foreign exchange reserves.

The emergency measures, announced via two government directives late Tuesday, 12 May, follow a period of intense volatility for the national currency.

Earlier that day, the rupee hit an all-time low against the US dollar, plummeting to 95.73 before a slight recovery.

Strategic Defence of the Currency

The move is a direct response to the economic fallout from the ongoing conflict in the Middle East.

Since the initiation of military strikes on Iran on 28 February, the rupee has shed nearly 5% of its value, marking it as one of the weakest performing currencies in Asia.

By targeting precious metals—India’s second-largest import after fossil fuels—the government aims to reduce the outflow of US dollars.

Prime Minister Narendra Modi recently urged citizens to curb their gold purchases, noting that global transactions for the metal are conducted in dollars, further straining national reserves.

Middle East Conflict Strains Energy Supply

As the world’s third-largest importer of hydrocarbons, India’s economy is currently under significant duress due to supply chain disruptions.

Persistent navigation hazards in the Strait of Hormuz have threatened the flow of essential oil and gas, driving up procurement costs.

Despite these rising pressures, New Delhi has so far refused to increase domestic fuel prices for consumers.

Instead, the Prime Minister has called for a nationwide reduction in petrol consumption, advocating for public transport and carpooling to mitigate the crisis.

Cultural Impact

The tax hike is expected to be felt deeply across Indian society, where gold plays a central role in religious festivals and the wedding season.

However, with the rupee under unprecedented pressure and energy security at risk, the administration has prioritised macroeconomic stability over the traditional demand for precious metals.

Source: Defi Media