Policy Controls Impact of Gold Sales

Jordan Hartwell

Published: January 26, 2026 2:15 AM ET

As Finance Minister Nirmala Sitharaman prepares for her eighth Union Budget, the ongoing dynamics of gold sales present a considerable challenge. Currently, gold prices sit at approximately Rs 1,60,000 per 10 grams. While this figure does not directly affect her personal purchases, it underscores the broader economic implications stemming from both legal and illegal gold imports. Analysts suggest that these trends may obstruct the Finance Minister’s economic vision.

Shifting Trends in Gold Sales and Imports

Recent reports show an alarming shift among Indian bullion dealers, who are now charging premiums exceeding $110 above the official gold prices. This change follows a period when they previously offered a discount of $10. Analysts theorize that this heightened premium is a response to expectations that the government may increase import duties in the upcoming budget.

In 2024, Nirmala Sitharaman reduced the import duty on gold from 15% to 6%. This reduction aimed to combat extensive gold smuggling and was initially effective, leading to decreased illegal imports. However, the recent surge in gold prices—over 40% in the first nine months of the financial year—has complicated the scenario.

Impact on Trade Deficits and Smuggling

The increase in gold prices has significantly impacted India’s trade balance. For example, the recently reported gold import bill for 2025 remained stable at $59 billion, even as volumes dropped by over 20%. This discrepancy is largely attributed to skyrocketing gold prices, which have stifled genuine imports but have seen the value of gold imports escalate substantially.

In December 2024, gold imports exceeded $4 billion.
October 2025 saw a peak of more than 100 tonnes imported monthly during the festive season.
The trade deficit soared to over $40 billion, mirroring a remarkable 199% increase in the value of gold imports.

Between November and December 2025, the trade deficit partially receded to around $25 billion, primarily due to declines in gold imports. Nonetheless, the fragile balance remains a pressing issue for the Finance Minister.

The Dilemma of Policy Controls

Sitharaman faces a significant conundrum regarding gold sales and smuggling. Despite the 2024 import duty cut, illegal imports are resurging. Officials report an uptick in illicit gold seizures, with notable cases of gold being smuggled from China via various routes.

Currently, smugglers benefit from a 9% margin due to the difference between global and local gold prices. For instance, the profit margins from smuggling 50 tonnes monthly can soar to INR 2,000 crore. This lucrative return attracts organized criminal syndicates, complicating enforcement and regulation.

Potential Strategies Moving Forward

Sitharaman has two primary paths to consider:

Decrease the import duty further to make legal imports more attractive and suppress smuggling.
Increase import duties to manage the trade deficit, risking a rise in smuggling activities.

Public sentiment continues to reflect a strong appetite for gold, with Morgan Stanley estimating that Indians possess approximately 34,600 tonnes of gold, valued at nearly $4 trillion. This amount surpasses the gold reserves of numerous international central banks combined, indicating the potential sensitivity to any changes in duty structures and price fluctuations.

In conclusion, the complexities surrounding gold sales and imports present a formidable challenge for Finance Minister Nirmala Sitharaman. As her budget approaches, the implications of policy controls on gold will be critical to the nation’s economic trajectory. The balance between fostering legal trade and mitigating smuggling will be vital for future economic stability.