Union Budget 2026: What to Expect for Gold and Silver Markets in India

India’s Finance Minister Nirmala Sitharaman is set to unveil the Union Budget for FY27 on a rare Sunday, February 1, 2026. India’s annual budget document is not only a mere financial statement of the Federal government, but also an important policy document. The government may recalibrate tariffs (import duties) for all goods in the budget after GST 2.0 (tax cuts) to pave the way for a smoother implementation of various FTAs and BTAs in the coming days (like with the EU recently). 

India is now trying to rationalise its age-old very high tariff structure to a normal global standard to diversify its export/import trade amid an environment of US (Trump) trade & tariffs war and global trade fragmentation. India is set to abolish the legacy tag of ‘Global Maharaja/King of tariffs’ in this budget, which may be implemented gradually over the next 5–10 years to pave the way for domestic producers to prepare to face foreign competition and improve efficiencies and reduce the cost of production. 

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Also, lower import duties will be beneficial for the overall Indian economy as it will lower imported raw materials, industrial intermediaries, food, fuel, fertiliser, speciality chemicals, pharma APIs, critical minerals, rare earth materials, and electronic parts. India now imposes an effective  6% import duty on precious metals like Gold & Silver (5% Basic Custom Duty and 1% Agriculture Infrastructure and Development Cess), although it’s lower than 10-12% during 2012-23, it’s still much higher than the pre-2012 era of 1-2%. India is now trying to balance macro/CAD/Rupee stability and also illegal smuggling by keeping import duty on Gold & Silver in a median range like 6% rather than too low (1-2%) or too high (10-12%). India now also imposes 3% GST on top of tariffs for domestic sales/jewellery. 

The Union Budget 2026-27, to be presented by Finance Minister Nirmala Sitharaman on February 1, 2026, arrives at a pivotal moment for India's precious metals markets. With gold and silver prices at record highs amid global uncertainties, the budget's decisions on import duties, taxation, and related policies could significantly influence domestic prices, demand patterns, and the broader gems and jewellery sector. 

Gold & Silver Duties 

Gold & Silver enjoy a dual benefit of higher global prices, higher USDINR and also relatively higher tariffs (6%)-compared to 0% in developed economies like the US, EU or China. India’s relatively higher tariffs and GSTs & other levies cumulatively results around 10% total taxation on Gold, paving the way for illegal smuggling even now-considering skyrocketing prices of gold & silver in India.

Gold is an integral part of Indian cultural & spiritual heritage and a natural hedge against consistent local currency (INR) devaluation & inflation. Gold also acts as a financial security of last resort in Indian households, especially among housewives. In 2025, India’s Gold prices zoomed dramatically, almost 70% led by a similar appreciation in global prices and also +5% gains in USDINR. 

Historically, India’s Gold delivered an average CAGR of around 11% since 1990 (Asian Financial Crisis and subsequent currency devaluation) from ~3200/- per 10 gm to ~138000/- per 10 gm; appreciated almost 43 times, comparable to any hot tech stocks! As of January 29, 2026, India’s MCX gold made a new lifetime high around 18200/- vs COMEX Gold spot (XAUUSD) $5597, while MCX Silver made a lifetime high around 420000/- vs COMEX Silver spot (XAGUSD) $121. 

In India, most of the ordinary publics are financially illiterate, especially housewives; only around 1-2% of Indians out of 1.5 billion people are active in India’s stock market. For them, Gold is the ultimate, especially for South Indians. And in that aspect, despite having no meaningful knowledge about India’s stock market, the Main Street has beaten the Dalal Street convincingly; gold delivered 70% return against Nifty’s muted 10% in 2025.

India remains one of the world's largest consumers of gold and a major importer of both gold and silver. In 2025, gold imports reached around $58.9 billion, up 1.6% (y/y), while silver imports surged 44% to $9.2 billion. These inflows, driven by elevated prices and strong investment demand, consumed nearly a tenth of India's foreign exchange reserves, contributing to concerns over the trade deficit and rupee pressure.

The government may rationalise tariffs on Gold & silver to boost the gems and jewellery sector, suffering under Trump’s tariff war.

Elevated prices of Gold & Silver also create headwinds for India’s retail jeweller sector, which has been going through a rough patch for the last year. Against this backdrop, India’s Union Budget for FY27 is anticipated to address fiscal pressures, including curbing non-essential imports while supporting domestic manufacturing and exports in the gems and jewellery sector, which employs millions and contributes significantly to forex earnings.

India’s gems and jewellery sector is now facing a vital dual challenge- record-high input costs are causing affordability issues, affecting domestic demand, while the Trump tariff tantrum is also disrupting the top export market (U.S.). India’s local jewellery consumption, a cultural staple for weddings and religious festivals, slumped in 2025 due to affordability issues. As per WGC (World Gold Council) estimates, India’s overall gold demand slumped almost 11% to ~710.9 tonnes in 2025, the lowest since COVID. 

Key pre-budget demands from bodies like the Gem & Jewellery Export Promotion Council (GJEPC) and industry leaders include:

• Rationalisation/recalibrations (cuts) of import duties on raw materials (gold, silver, platinum, and coloured gemstones).
• Reduction in GST on jewellery.
• Simplification of customs procedures (deregulations)
• Promotion of gold monetisation schemes (by RBI).
• Alignment of tax treatments for physical gold and paper/digital products.

The sector views the budget as an opportunity to revive demand, boost exports, and counter global headwinds like competition from lab-grown diamonds.

What to Expect for Gold and Silver Markets from Budget 2026

The budget's primary policy instruments for gold and silver are customs/import duties (tariffs) and GST rates, with secondary influences via fiscal signals, rupee management, and incentives for digital/formal channels.

Tariffs-Customs/Import Duties Cuts: The Critical Flashpoint

• The current effective import duty on gold stands at around 6% (following reductions in prior budgets, e.g., from 15% in the 2024 cuts to curb smuggling). 
• Silver duties have seen similar adjustments, though historically varied (e.g., hikes in 2023 to align with gold/platinum).
• Industry expectations lean towards further calibrated reductions or continuity to lower costs, improve export competitiveness, and stimulate jewellery manufacturing. 
• Industry leaders argue that lower duties would reduce landed costs, encourage formal buying, and help counter high prices, dampening demand.

Other Policy Measures and Broader Impacts

• Gold Monetisation and Digital Shift: Revival or enhancement of Sovereign Gold Bonds (SGBs) or monetisation schemes could channel idle household gold into the formal system, reducing import dependence and easing forex pressure.
• Tax Alignment: Harmonising long-term capital gains treatment (1-year holding for physical gold to match ETFs) would benefit retail investors.
• Export and Manufacturing Support: Simplified customs, special zones, or duty drawbacks could aid exporters facing global competition.
• Fiscal Context: The budget prioritises capex, defence, and macro stability. Any duty hike would signal caution on imports, while cuts would support consumption-led growth.

Conclusions

The Union Budget 2026 may ensure a balancing act: curbing import pressures versus supporting a vital sector. While prices are structurally elevated, targeted relief on tariffs and GST could provide relief to consumers and manufacturers.