Commerzbank strategists note that India has more than doubled tariffs on Gold and Silver to 15% to curb Dollar demand and support INR. They highlight that strong bullion imports have widened the trade deficit and intensified USD competition, while USD/INR remains near record highs as foreign investors sell equities.

India leans on tariffs to aid INR

"The government more than doubled gold and silver tariffs to 15% from 6% in a bid to stem the slide in the INR."

"Higher tariffs on gold and silver imports are intended to support INR by narrowing the trade deficit and curb dollar demand. In Q1 2026, gold and silver imports, which account for 14% of total imports, surged 146% yoy as global gold and silver prices rose 60% and 161% yoy, respectively. Strong bullion demand from traders and households for investment and cultural purposes has intensified onshore USD demand and widened the trade deficit."

"However, the move is unlikely to be effective in isolation, as gold demand in India remains relatively price inelastic given its cultural significance. Instead, the measure likely signals the start of a broader coordinated effort to defend the currency."

"Over the weekend, Prime Minister Narendra Modi urged citizens to curb gold purchases, reduce fuel consumption, and limit air travel to preserve the Reserve Bank of India’s (RBI) FX reserves. His remarks suggest possibly further measures to support the INR. India's FX reserves fell 1.1% to USD690.7bn for week-ending 1 May."

"In FX, USD/INR rose 0.1% to 95.72 yesterday as the pair posted gains for the fourth consecutive session. It remains near the all-time high due to higher oil prices and net outflows. Foreign investors have net sold USD1.6bn of equity so far this week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)