India has increased its import duties on gold and silver in a bid to prop up the falling value of the rupee and shore up its war-hit foreign currency reserves in the Middle East.
Gold imports are financed in dollars, meaning buyers must dip into their foreign exchange reserves or convert rupees to make their purchases.
Prime Minister Narendra Modi had already appealed to the public a few days ago to avoid buying gold for a year, as the rupee’s year-long fall against the dollar worsened during the Iran war.
The government has more than doubled import taxes on gold and silver, bringing them to around 15% from the current 6%, according to two official decrees published Tuesday evening.
The energy supply crisis caused by the closure of the Strait of Hormuz, through which a fifth of the world’s crude oil passed, has hit India hard.
India is the world’s third largest importer of oil and the surge in oil prices has affected its foreign exchange reserves.
High crude oil prices have increased India’s import bill, putting further pressure on the country’s balance of payments and foreign exchange reserves.
Modi on Sunday urged the people of India to reduce their consumption of gasoline and diesel in response to supply disruptions due to the war in the Middle East.
Gold, considered a symbol of wealth and prosperity and widely used during weddings as well as festivals, ranks second among Indian imports, after crude oil.
