- Prime Minister Modi urged Indians to avoid gold purchases for one year due to import concerns
- India raised gold import duty from 6% to 15%, matching 2022 levels to curb imports
- Higher import duties have historically led to increased gold smuggling in India
Prime Minister Narendra Modi's recent appeal asking Indians to avoid buying gold for a year has once again shifted focus to India's heavy dependence on gold imports. The appeal comes at a time when tensions in the Middle East are pushing up global crude oil prices and increasing pressure on India's import bill.
The appeal has been followed by a more concrete intervention too. The government has increased the import duty on gold from six per cent to 15 per cent, bringing it back to the level seen in 2022. But does high import duty bring another concern -- smuggling? The answer is, Yes.
Higher gold prices and costly legal imports have historically fueled gold smuggling in India. The Directorate of Revenue Intelligence (DRI), in its official reports, has repeatedly linked rising import duty and high domestic gold prices with increased smuggling activity.
DRI stated that "the increase in the incidence of duty on the imported gold, has incentivised the smuggling of the yellow metal."
The data reflects how rapidly smuggling expanded in recent years, despite strict airport surveillance and security checks. India recorded around two gold smuggling cases per day at airports in FY22, while authorities seized 0.4 kg of gold daily, on average. However, by FY24, the number of daily airport smuggling cases had jumped to 16, while daily gold seizures crossed 10 kg.
This was also the year when gold prices witnessed an exceptional surge in 2024, hitting around 40 record highs during the year amid geopolitical tensions, strong central bank buying and rising investor demand for safe-haven assets, according to the World Gold Council.
The council said the average global gold price rose 23 per cent in 2024, while in India, domestic gold prices touched record levels of nearly Rs 79,700 per 10 grams. The sharp rise in prices also affected jewellery demand, though investment demand remained strong as investors increasingly turned to gold during global uncertainty.
The domestic gold prices in India also touched record highs in 2024 amid the global rally. In March 2024, gold prices in India reached an all-time high of Rs 66,529 per 10 grams, while prices later climbed close to Rs 79,700 per 10 grams by October. The high prices of gold corroborates with the expensive imports and rising cases of gold smuggling.
Even in FY25, agencies continued seizing more than 5 kg of smuggled gold every day at airports. By FY26 till October, the trend had slowed, with daily seizures falling to nearly 1.2 kg.
According to the latest DRI Smuggling in India Report 2024-25, airports accounted for 43.7 per cent of gold smuggling cases in FY25, while more than 55 per cent of smuggling was routed through land borders.
DRI reports also show that smuggling methods have evolved significantly. Smugglers increasingly shifted from airports to land-border routes through Myanmar, Bangladesh and Nepal. Authorities also detected growing use of carrier networks, body concealment and gold paste techniques to avoid detection.
The concern for policymakers is that if gold prices continue rising because of global uncertainty and conflict in the Middle East, illegal gold trade could once again become more profitable. That may increase smuggling pressures even if official gold imports slow down.
