More than five tonnes of gold and about eight tonnes of silver are stuck at Indian customs after an annual import authorisation lapsed, a pause that has stopped banks placing fresh bullion orders and risks lifting import premiums ahead of the wedding and festival season. The move follows Prime Minister Narendra Modi's May 10 appeal for households to defer non-essential gold purchases and a string of tax and regulatory steps aimed at cutting an import bill the Ministry of Commerce and Industry says rose to $72 billion in FY26. Traders and refiners say they're waiting for a fresh Directorate General of Foreign Trade directive to clear consignments and allow imports to resume.
The read is straightforward. What looked like ordinary policy tightening has become an operational squeeze. Banks stopped placing fresh import orders after the Directorate General of Foreign Trade's annual list of banks authorised by the Reserve Bank of India to import gold and silver lost legal cover, and the April 2025 order expired on March 31 without a successor. That administrative gap left more than five tonnes of gold stranded at customs, market participants said, and roughly eight tonnes of silver in the same position.
How policy and politics tightened flows
New Delhi has linked the recent crackdown to the country’s broader external imbalance. The Ministry of Commerce and Industry calculates India’s gold import bill climbed from $36.5 billion in 2022 to $58.9 billion in 2025, and then to $72 billion in FY26. Officials point to rising crude import costs and a weakening rupee as reasons to narrow the import bill. Those figures have shaped both tax moves and public appeals.
On May 10 Prime Minister Narendra Modi publicly urged households to defer non-essential gold purchases. The appeal was followed by higher import duties and regulatory guidance that industry participants say directly discouraged spot dollar purchases by refiners and tightened who can legally import bullion. Traders and refiners cited those steps, along with the lapsed Directorate General of Foreign Trade order, as the practical reason shipments were paused.
At the same time, market routing matters. The India-UAE trade pact's Tariff Rate Quota mechanism has shifted a growing share of imports through the UAE at concessional duties. Imports routed via Dubai rose sharply and accounted for 28% of India’s total by 2025. The quota began at 120 tonnes and is scheduled to rise to 200 tonnes from 2027. When standard channels are constrained, importers use the quota to manage cost and availability.
Demand response and market ripple effects
The demand picture is mixed, because the sources describe different stages of the same market. One analysis reports average monthly imports surged to 83 tonnes in the opening months of 2026, up from 53 tonnes a year earlier, and that the value of gold demand nearly doubled to a record $25 billion in Q1.
That trend was attributed to households buying bullion as a hedge against currency and inflation risk.
By contrast, retail footfall and buying fell sharply after the prime minister's appeal and the price spike. Retail gold prices have been quoted above Rs100,000 per 10 grams in multiple Indian cities. Listed jewellers' shares fell after the combination of the appeal and price moves, and trade bodies warned of lower footfall ahead of the wedding and festival season. Industry groups cautioned the slowdown could cost jobs across an ecosystem that supports more than 10 million workers.
Some of the behavioural shift that pushed imports higher earlier in 2026 appears to be moving between channels. Dealers and industry groups said a portion of household demand shifted into investment instruments rather than retail jewellery. That pattern helps explain why import volumes rose even while policy tightened, and why the pause in authorised imports matters: it hits both the retail pipeline and the investment market that had been soaking up inflows.
Traders warned of immediate supply-side consequences if the administrative pause continues. Without a fresh Directorate General of Foreign Trade directive, they said, supply shortages could appear and import premiums could rise ahead of key buying windows. Market participants also point to the new measures that limit authorised importers and urge refiners to curb spot dollar buys as direct causes of the paused shipments.
The squeeze is therefore both political and procedural. Policymakers have signalled a desire to use tariffs and public appeals to cool household demand, and the lapse in the DGFT order turned those signals into a short-term operational halt. Banks told sources they have stopped placing new import orders, and customs balances are building up while importers wait for clarity.
The stakes extend beyond jewellery counters. The bullion trade is entwined with foreign exchange management, refinery flows and cross-border trade routing. How importers lean on the India-UAE Tariff Rate Quota will shape which channels absorb demand if authorised imports remain limited.
Related Articles
- Fed’s Miran pressed for 50bp cut, split with colleagues
- Trump Accounts: double tax break could funnel billions
- Versant stock jumps 10% as platforms and licensing shine
Market participants are awaiting a fresh Directorate General of Foreign Trade order authorising banks and importers to clear consignments and resume new orders. That directive will determine whether stocks trapped at customs move and whether import premiums ease ahead of key buying windows.
This article was created with AI assistance.
