Gold Imports Standstill Threatens Supply in India — Domestic Premiums Surge

A standstill in India’s bullion imports has entered its fifth week as banks refrain from placing new orders and consignments remain held at customs since the start of the financial year on April 1. Traders say the disruption is tightening domestic supply and lifting local premiums.

The interruption followed a delay in publishing the annual list of banks authorised to import precious metals. Although the Directorate General of Foreign Trade issued the list on April 17, port and customs officials have awaited a separate clearance instruction before releasing shipments; trade sources estimate more than 5 metric tonnes of gold and about 8 tonnes of silver were stranded.

Complicating the picture, dealers and lenders are seeking clarity on whether gold and silver will retain exemption from the integrated goods and services tax, a condition that has influenced buying decisions. As a result, some imports have shifted to the India International Bullion Exchange (IIBX), but market participants warn that IIBX routes can be slower and tie up working capital.

Despite a fall in international bullion prices since late February, domestic premiums have risen, with the World Gold Council noting a premium gap exceeding $20 an ounce this week. Higher local premiums increase replacement costs for jewellers and could feed through to retail prices, intensifying pressure on supply at a time of seasonal demand.

From a macro perspective, the import halt may be mildly positive for India’s trade balance in April because gold is a major import item after crude oil; however, extended disruption risks curbing jewellery sales and straining inventories. Market participants say the severity of the impact will depend on how quickly customs clearances and tax-treatment questions are resolved.

Analysts expect that prompt administrative clarification—explicit customs instructions and certainty on GST treatment—would allow banks to resume normal flows and ease premiums. Absent swift action, the market could face further short-term skews between international and domestic pricing, with implications for jewellery makers, refiners and India’s current account. Traders and policy watchers will monitor both clearance orders and any official statements from DGFT or customs authorities.