The Indian bullion market has suffered a massive shock, with gold demand crashing by nearly 70% in the latter half of May. This unprecedented decline comes directly in the wake of the government’s decision to sharply increase the import duty on gold from **6% to 15%**.

According to reports from the **India Bullion & Jewellers Association (IBJA)**, the combination of an increased tax structure and high global prices has severely rattled buyers, bringing retail jewelry sales and investment demand to a grinding halt across major hubs.

The Double-Whammy: Tax Hike & Global Inflation

Bullion dealers and jewelry retailers indicate that the market is facing a perfect storm:

• The 15% Import Duty: Raising the import duty from 6% to 15% has instantly inflated retail prices, forcing consumers to defer major purchases, particularly ahead of the upcoming wedding season.
• Dampened Consumer Sentiment: High local food and fuel prices have significantly squeezed household discretionary budgets. Much of this economic pressure is linked to global supply chain disruptions and geopolitical tensions in the Middle East.

Impact on the Jewelry Industry

The jewelry sector is one of India’s largest employment generators, and a prolonged demand freeze could have severe repercussions:

• Stock Accumulation: Retailers are holding vast amounts of high-priced inventory, leading to cash flow constraints.
• Risk of Grey Market Expansion: Industry experts warn that the high 15% duty creates a massive price differential, which traditionally incentivizes illegal gold smuggling, hurting legitimate tax-paying businesses.

While the government’s move is aimed at controlling gold imports to manage the current account deficit, the bullion industry is actively appealing for a balanced tariff structure to restore market stability and protect millions of livelihoods dependent on the trade.