India more than doubles gold and silver import tariffs to 15%, effort to prop up the rupee

What the desk is arguing

India's recent tariff hike on gold and silver imports is a strategic attempt to stabilize the rupee and mitigate the trade deficit. This policy shift, which raises tariffs from 6% to 15%, is designed to curb the outflow of foreign exchange reserves that has been exacerbated by rising gold imports. Per the full note source, the government is particularly concerned about the impact of these imports on the current account deficit, which has been a persistent issue for the economy.

The decision comes at a time when gold demand in India has surged, with ETF inflows reaching a record 20 metric tons in the March quarter, a staggering 186% increase year-on-year according to the World Gold Council. This spike in demand, coupled with elevated gold prices, suggests that the new tariff regime could lead to a significant drop in official imports, as dealers anticipate a resurgence of smuggling activities that had previously diminished following lower tariffs.

Where it sits in our coverage

Our consensus target for the USD/INR pair is 1.075, with a range of 1.04 to 1.12. Notable firms include: - jpmorgan: 1.10 (Mar-26) - bofa: 1.04 (Mar-26) - citi: 1.12 (Mar-26)

This view aligns with jpmorgan's target, which sits at the upper bound of our consensus range, indicating a potential bullish outlook on the rupee in light of the tariff increase, despite the risks associated with smuggling.

How other firms see it

Firms like jpmorgan and citi are aligned with the desk's perspective, emphasizing the potential for the rupee to strengthen as the government takes measures to curb gold imports. Conversely, bofa presents a contrary view, suggesting that the tariff increase may not effectively address the underlying issues of demand and could exacerbate smuggling.

The dynamics of the gold market are closely tied to the USD/INR exchange rate, and traders should also monitor the Reserve Bank of India's stance on interest rates, which could further influence currency movements in response to these developments.

What the calendar says

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