India has reached an important turning point in its economic journey, where the import of gold and silver jewellery is no longer just about supporting the jewellery industry, but has also become a key lever for managing the trade deficit and current account deficit.
In recent months, imports of precious metals have risen sharply, prompting the government to introduce two major changes in import rules. On one hand, jewellery imports have been moved to the restricted category, and on the other, base import values have been reduced. These steps have had an immediate impact on costs, margins, and the share market performance of the jewellery sector.
Let us understand this development in detail and what it means for the jewellery industry and investors.
What’s Happening?
The government has shifted the import of gold, silver, and platinum jewellery from the ‘Free’ category to the ‘Restricted’ category. Under this change introduced by the Directorate General of Foreign Trade (DGFT), prior permission or a special licence is now required for imports falling under Customs Tariff Heading 7113. Earlier, imports could take place freely, but now traders will have to go through documentation and government approvals. This change is effective immediately, with no transitional relief or grace period. Even signed deals, completed payments, or shipments already in transit will fall under the new rules.
This step has primarily been taken to curb the misuse of Free Trade Agreements (FTAs), especially the India-ASEAN agreement. Some traders were reportedly routing crude gold and silver through countries like Thailand and declaring them as jewellery to avoid higher duties. This loophole has now been closed by moving such imports to the restricted category. However, imports under Special Economic Zones (SEZs), 100% Export Oriented Units (EOUs), and government-approved export schemes remain unaffected. The industry’s response has been mixed, while many acknowledge the need to curb unfair practices, concerns remain around potential delays in licensing and increased bureaucratic hurdles.
Gold Imports Surge: What Do the Figures Say?
During April–February 2025–26, India’s gold imports rose by 28.73% to reach $69 billion, compared to $53.52 billion in the same period last year. This increase, driven by high prices and strong demand, has also widened the country’s trade deficit. The trade deficit stood at $310.60 billion during April–February 2025–26, significantly higher than $261.80 billion in the corresponding period of the previous year.
Switzerland remains the largest source of gold imports, accounting for around 40%, followed by the UAE (over 16%) and South Africa (10%). Gold alone contributes more than 5% to India’s total imports.
An even sharper rise was seen in silver imports, which surged by 142.87% to $11.43 billion. Silver is widely used across sectors such as electronics, automobiles, and pharmaceuticals. India is the world’s second-largest consumer of gold after China, with imports largely driven by jewellery demand. This surge has had a direct impact on the current account deficit (CAD). In the December quarter, CAD stood at $13.2 billion (1.3% of GDP), compared to $11.3 billion (1.1%) a year ago. However, for April–December 2025, CAD moderated to $30.1 billion (1%). In response to these trends, the government imposed import restrictions on gold, silver, and platinum to control rising imports.
The government has reduced the base import value of gold and silver, which triggered a sharp rally in jewellery stocks. The base import value of silver was reduced from $2,820 per kilogram to $2,427 per kilogram (approximately Rs 2,26,096 per kg), while gold’s base value was cut from $1,652 per 10 grams to $1,526 per 10 grams (approximately Rs 1,42,223). This move is expected to lower procurement costs, improve inventory economics, and make precious metals more affordable for consumers, potentially boosting demand.
The stock market reacted positively to this announcement. Senco Gold shares jumped 11.01% to Rs 320.60, while Kalyan Jewellers rose 5.40% to Rs 415.65. This surge reflects improved sentiment across the sector, as lower input costs are expected to support better margins. Amid ongoing geopolitical uncertainties, this move has come as a relief for jewellery companies.
What Does It Mean for Investors?
This policy shift sends mixed but largely positive signals for investors in the jewellery sector. Lower import values are expected to reduce input costs, improve margins, and ease inventory management. There is also potential for higher consumer demand, especially as gold prices remain elevated (around Rs 1,53,970 per 10 grams as of April 08 in the national capital). The recent rally in stocks like Senco Gold and Kalyan Jewellers reflects market confidence that these companies can benefit from improved cost dynamics.
While the restrictions aim to curb domestic misuse, export-oriented players remain largely unaffected due to exemptions for SEZs and EOUs. Investors may find opportunities in companies that can leverage improved cost efficiency for stable long-term growth. However, the overall impact will also depend on how efficiently the licensing process is implemented and how quickly smaller traders adapt. Overall, these changes could support long-term sector stability while helping control the trade deficit.
What’s Next?
Going forward, these policy measures could play a crucial role in balancing the trade deficit and managing the current account deficit. The sharp rise in gold (28.73%) and silver (142.87%) imports had already put pressure on the trade balance, but the shift to the restricted category along with reduced base values is expected to curb excessive imports. The jewellery industry, one of the largest drivers of gold demand in the country, may now benefit from lower costs and improved margins.
Investors should maintain a long-term perspective, as these changes could make the sector more organised and sustainable. If the licensing process remains efficient, concerns around delays may ease, supporting continued industry growth. Ultimately, these measures could help position India as a more balanced player in the global precious metals trade, provided investment decisions are backed by thorough research.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
