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India’s centuries-old relationship with gold is entering a defining phase. Once driven almost entirely by tradition, weddings, and wealth preservation, the gold market is now increasingly shaped by geopolitics, macroeconomic pressures, and government policy interventions. Rising international tensions, volatile commodity markets, and the need to protect India’s foreign exchange reserves have pushed the government to tighten gold imports through a steep increase in import duty and agricultural cess.
The move reflects a broader economic strategy anchored in self-reliance and fiscal resilience. Yet, while the policy may strengthen macroeconomic stability, it has simultaneously created fresh challenges for India’s gem and jewellery ecosystem, impacting everyone from exporters and MSME manufacturers to retailers and consumers.
At the centre of this transition is a difficult balancing act: reducing dependence on imported bullion without weakening one of India’s most employment-intensive and culturally significant industries.
Why Gold Has Become a Strategic Economic Concern
Gold has always occupied a unique place in India’s economy. It is both a cultural asset and a financial instrument. However, in times of global uncertainty, its economic implications become far more pronounced.
Escalating geopolitical conflicts, sanctions, and supply chain disruptions have pushed investors and central banks worldwide toward safe-haven assets, causing international gold prices to surge. Simultaneously, tighter global liquidity conditions and concerns around foreign exchange management have made large-scale bullion imports increasingly sensitive for policymakers.
India, which imports the majority of its gold requirement, faces substantial foreign currency outflows whenever gold prices and import volumes rise together. In response, the government raised gold import duty from 5 percent to 10 percent and increased agricultural cess from 1 percent to 5 percent, signalling a clear intent to moderate demand and conserve forex reserves.
The policy direction also aligns closely with Prime Minister Narendra Modi’s “Nation First” and Atmanirbhar Bharat narrative, which encourages industries to support economic self-sufficiency and reduce import dependence.
Kalyan Jewellers India Limited has recently announced the launch of the ‘Nation First – Gold4India Initiative’, a strategic framework to activate dormant household reserves of the precious metal, formalise trust in gold liquidity, and encouraging more responsible consumption patterns.
The initiative is in direct response to the Hon’ble Prime Minister Shri Narendra Modi's appeal to all Indians to exercise restraint to help conserve the country's foreign exchange reserves. It is expected that the ‘Nation First – Gold4India Initiative’ will target to reduce imports by 5 tonnes of gold over the financial year.
Industry Aligns with National Priorities; But Seeks Balance
The gem and jewellery industry has largely acknowledged the government’s broader economic concerns. The Gem and Jewellery Export Promotion Council (GJEPC) has actively engaged with policymakers and proposed several structural measures aimed at reducing reliance on imported bullion while protecting exports and employment.
The industry body has suggested promoting lower-carat jewellery such as 14K and 9K products, which can significantly reduce gold consumption by weight while catering to evolving consumer tastes. It has also advocated stronger exchange and buyback programmes to bring idle household gold back into circulation.
A major focus area is the revival of the Gold Monetisation Scheme (GMS), which aims to mobilise India’s vast stockpile of household gold estimated at nearly 25,000 tonnes. By encouraging consumers to deposit unused gold into formal channels, the industry believes India can reduce fresh import dependence while unlocking domestic liquidity.
At the same time, GJEPC has cautioned against excessive tariff pressure. Industry leaders argue that sharp duty hikes may unintentionally increase smuggling, inflate domestic prices, and create severe working capital stress for exporters and MSME manufacturers.
One of the most immediate concerns is the rising burden of bank guarantees linked to duty-free gold procurement, which has significantly strained liquidity for smaller businesses already grappling with elevated raw material costs.
Jewellery Brands Must Reinvent Strategy in a High-Price Era
For large organised jewellery brands, the current environment is not merely a challenge, it is also an opportunity to reshape the industry’s future.
Aditya Modak, CFO and COO of P. N. Gadgil & Sons, highlighted the uncertainty created by the sudden duty hike. According to him, the increase has impacted both consumer sentiment and inventory planning across the sector. He noted that jewellers are now dealing with significantly higher working capital requirements and pricing pressures across categories.
He also pointed out that brands must stay closely aligned with changing consumer behaviour by offering a broader portfolio that includes lightweight contemporary jewellery, exchange programmes, hybrid retail models, digital consultations, and transparent pricing mechanisms.
Industry experts believe brands that adapt quickly to affordability-focused consumption patterns will be better positioned for long-term resilience.
T S Kalyanaraman, Managing Director, Kalyan Jewellers India Limited said, "A stronger domestic recirculation ecosystem can sustain employment in the jewellery sector and help states preserve GST revenues linked to organised trade. The ‘Nation First – Gold4India Initiative’ is far beyond just a promotional campaign. The initiative will strive to spark a behavioural shift in consumers, from viewing gold solely as a static asset preserved indefinitely, to recognising it as a renewable domestic resource capable of continuously generating economic value within the country. If even a fraction of this inactive gold can be responsibly brought back into circulation, India can potentially reduce incremental dependence on imported gold without disrupting consumer aspirations or cultural traditions."
"The recirculation of gold cannot remain confined to policy discussions or urban consumption patterns," Kalyanaraman said. "Its long-term success depends on participation from the very households and communities where India's gold ownership is most deeply rooted. Responsible consumption and cultural continuity can, and must, coexist."
Key Strategies Jewellery Brands Should Prioritise
Shift Toward Lower-Carat Jewellery
The growing acceptance of 14K and 9K jewellery presents a major opportunity. These products reduce gold consumption while offering modern aesthetics, affordability, and design flexibility for younger buyers.
Supporting the initiative, Kalyan Jewellers, crafted its 'Cannes Kalyani Priyadarshan jewellery' with 14k white gold.
Expand Gold Exchange and Buyback Ecosystems
Consumers are increasingly willing to exchange old jewellery for new designs. Transparent valuation systems and instant exchange credits can help formalise idle gold circulation while reducing dependence on fresh imports.
Strengthen Consumer Financing
Flexible EMI schemes, gold-linked loyalty programmes, and trade-in incentives can help maintain purchasing momentum despite rising prices.
Build Domestic Refining and Sourcing Capacity
Investment in local refining infrastructure, traceability systems, and domestic alloying capabilities can gradually reduce reliance on imported processed bullion.
Collaborate on Gold Monetisation
Brands can play a crucial role in educating consumers about monetisation schemes and integrating GMS-linked services into retail operations.
Improve Supply Chain Transparency
With regulatory scrutiny increasing, brands are expected to adopt stronger compliance frameworks, hallmarking systems, and ethical sourcing practices to reinforce consumer trust.
Reposition Gold as Lifestyle Consumption
Marketing strategies are increasingly shifting from pure investment messaging toward fashion, self-expression, craftsmanship, and everyday wearability.
Consumers Are Already Changing Their Behaviour
India’s jewellery consumer is evolving rapidly under the pressure of higher prices and changing aspirations.
Buyers are becoming far more value-conscious, often preferring lightweight and wearable designs over heavy traditional purchases. Exchange-led buying is also increasing, particularly among urban consumers upgrading older jewellery into newer styles.
Younger shoppers are showing stronger preference for studded jewellery and lower-carat collections that offer affordability without compromising on aesthetics. At the same time, traditional wedding and legacy purchases remain deeply embedded in Indian households where gold continues to carry emotional and financial significance.
Aditya Modak noted that while demand for ceremonial jewellery remains strong, aspirational and design-led categories are gaining traction because consumers are prioritising versatility and affordability alongside investment value.
Digital discovery is also reshaping purchase journeys. Consumers increasingly research online, compare prices and designs digitally, and then complete purchases through trusted branded retailers offering certification and transparency.
The MSME Challenge Cannot Be Ignored
While large organised brands may have the scale to absorb rising costs, India’s jewellery MSMEs remain highly vulnerable.
Higher duties and stricter compliance requirements are squeezing liquidity for smaller manufacturers, many of whom operate on thin margins and limited access to institutional financing. Working capital stress, combined with rising gold prices, threatens employment generation and export competitiveness across the sector.
There are also concerns that elevated domestic gold prices could fuel informal trade and smuggling, undermining compliant businesses operating within formal systems.
Industry stakeholders are therefore calling for calibrated policy measures, including eased bank guarantee norms, liquidity support mechanisms for MSMEs, and export-focused incentives that protect India’s global competitiveness.
A Defining Moment for India’s Jewellery Industry
India’s gold economy is at an inflection point. The government’s push for macroeconomic stability and reduced import dependence is unlikely to reverse anytime soon. At the same time, the jewellery industry remains too important in terms of exports, employment, craftsmanship, and cultural significance to be constrained without strategic support.
The path forward lies in collaboration rather than confrontation.
If policymakers focus on long-term structural reforms such as revitalising gold monetisation, expanding refining capacity, supporting MSMEs, and encouraging financialisation of gold, the industry could emerge stronger and more resilient.
For jewellery brands, the transition will require agility, innovation, and consumer-centric thinking. Those that successfully balance affordability, transparency, design innovation, and national economic priorities will shape the next era of India’s gold story.
What appears today as a policy disruption may ultimately become the catalyst for a more organised, modern, and self-reliant jewellery industry.
