Import Channels

India imports approximately 800 tonnes of gold and over 5,000 tonnes of silver every year, making it the world's second-largest consumer of both metals. These staggering volumes exist because India's domestic mining output is negligible — less than 2 tonnes of gold per year. The country's geology, combined with stringent environmental regulations and the decades-long process of obtaining mining leases, means that virtually all of India's gold and silver demand must be met through imports.

Four distinct import channels serve this demand, each with different market share and regulatory requirements. RBI-nominated banks handle the bulk of gold imports, operating through consignment arrangements with LBMA-accredited refiners and selling to domestic jewellers via designated branches. Government-nominated agencies like MMTC and Star Trading Houses form the second channel. The IIBX (India International Bullion Exchange) in GIFT City, operational since 2022, represents the third and fastest-growing route, allowing qualified jewellers to import directly. Finally, the UAE CEPA preferential tariff route provides a fourth channel for finished gold articles at a reduced 1% duty rate.

The July 2024 duty reduction — from 15% to 6% Basic Customs Duty — was a watershed moment for India's gold market. This single policy change, the largest duty cut in over a decade, had cascading effects across the entire supply chain. Domestic prices immediately dropped closer to international benchmarks. The India premium, which had historically ranged from $10 to $40 per ounce, narrowed sharply. Crucially, the lower duty reduced the economic incentive for smuggling, which had been estimated at 100-150 tonnes annually when duties were at their peak of 15%.

The India-UAE CEPA route has gained growing significance since its implementation. With a Tariff Rate Quota of 200 tonnes per annum for gold articles manufactured in the UAE, this channel allows imports at just 1% BCD — a significant saving even against the reduced 6% standard rate. However, strict Rules of Origin compliance and UAE manufacturer certification requirements prevent misuse of this preferential route.

Import volumes directly affect domestic prices and the so-called India premium — the difference between Indian retail prices and the international benchmark after accounting for duties and taxes. During months of heavy imports (typically pre-Diwali and pre-Akshaya Tritiya), the premium tends to compress as supply is abundant. Conversely, when imports slow due to policy uncertainty, port congestion, or global supply disruptions, the premium widens and domestic buyers pay more relative to the London fix. Tracking import data alongside duty structures gives consumers and traders a clearer picture of where gold and silver prices are headed in the near term.