Gold smuggling surges as tariff hike squeezes organised retailers

Gold smuggling has accelerated sharply following the government's decision to raise import duties, creating substantial challenges for the organised jewellery sector. The quantum of illicit gold entering the market reached 50 tonnes during the third quarter of the current calendar year, reflecting a marked uptick in illegal trade activity.

The import duty increase to 15 per cent has significantly expanded the price differential between smuggled gold and legitimately imported bullion. This widening gap has made smuggled gold substantially more attractive to consumers, particularly in price-sensitive segments of the market, while simultaneously eroding the competitive position of organised retailers operating within the regulatory framework.

The surge in smuggling undermines formal jewellery businesses that comply with customs regulations and tax requirements. Retailers facing pressure from cheaper illicit alternatives report declining margins and reduced competitiveness, creating a structural disadvantage for the legitimate trade.

The illicit gold trade also represents a substantial revenue loss for the government and complicates efforts to monitor and regulate India's precious metals market. Industry stakeholders have raised concerns about the unintended consequences of the tariff policy, arguing that the duty structure inadvertently incentivises smuggling while penalising compliant businesses and consumers choosing to purchase through authorised channels.