MUMBAI, India (FN) — Gold smuggling into India has surged ahead of major festivals, driven by record-high prices and a tightening supply, government and industry officials said Thursday. The spike comes despite recent reductions in import taxes aimed at curbing illicit trade.
India, the world’s second-largest consumer of gold, had seen a decline in smuggling after the government cut import duties from fifteen percent to six percent last year. However, the current market dynamics have reignited underground activity.
A Chennai-based bullion dealer said that strong festival demand and limited supply have made it easier and faster for smugglers to liquidate gold, sometimes within hours. “The payoff is now super tempting for them,” added a senior dealer in Mumbai.
Indians are preparing to celebrate Dhanteras and Diwali this month, occasions traditionally associated with buying gold. These festivals mark some of the busiest days for gold purchases across the country.
Gold prices in India reached a record high of over one hundred twenty-eight thousand rupees per ten grams on Thursday, reflecting a sixty-seven percent increase since the beginning of the year.
At current rates, smuggling one kilogram of gold can yield margins exceeding one point one million rupees, bypassing the six percent import duty and an additional three percent local sales tax. Earlier in the year, margins had dropped to around six hundred thirty thousand rupees per kilogram following the duty cut.
Investor demand has intensified, creating a supply crunch and driving up premiums. Banks are reportedly unable to meet full demand and are charging steep premiums on available stock, according to a jeweller in Kolkata.
Dealers this week quoted premiums of up to twenty-five dollars per ounce above official domestic prices — the highest in more than a decade.
In the fiscal year ending March 2025, Indian authorities registered over three thousand cases of gold smuggling and seized approximately two point six metric tons of the metal.
Officials say enforcement efforts are ongoing, but the combination of high prices, cultural demand, and limited supply continues to fuel the underground market.
