<p>Government red tape is creating havoc in India’s gold market.</p>
<p>For the last five weeks, gold imports have virtually stopped. According to the Economic Times of India, this is pushing domestic gold prices higher and threatening shortages in the world’s second-largest gold market.</p>
<p>The gold price premium in India surged above $20 last week, signaling extreme tightness in the market.</p>
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<p>This gold supply disruption is purely a product of government incompetence.</p>
<p>According to the <em>Times</em>, gold shipments have been stuck in customs since April 1 due to “<em>administrative bottlenecks and a lack of clarity over taxes</em>.”</p>
<p>The problems started when India’s trade ministry failed to publish its annual list of banks eligible to import precious metals in a timely manner. The ministry finally published the list on April 17, but now there is another administrative bottleneck.</p>
<p>According to the <em>Times</em>, “<em>Customs authority has yet to issue its own separate clearance order, which port and airport officials require before releasing incoming consignments</em>.”</p>
<p>There is also confusion about taxes. Bankers say it remains unclear whether gold and silver will be exempted from India’s integrated goods and services tax. The tax didn’t apply to metals last year, but it remains unclear whether the exemption will continue, according to traders who asked for anonymity.</p>
<p>There is reportedly a customs notification along with a tax clarification “awaiting approval.”</p>
<p>Meanwhile, the gold market is getting tight, and traders are getting antsy as they try to restock inventories after the Akshaya Tritiya festival.</p>
<p>FinMet Pte Ltd. managing director Sunil Kashyap told the Times that the duration of this import stoppage was “unusual,” adding that the situation is “getting tighter.”</p>
<p>Gold is still flowing into India through the <a href="https://www.moneymetals.com/news/2026/05/04/india-continues-to-bring-its-gold-home-004887">India International Bullion Exchange</a>. Imports through the bourse skyrocketed in April and May. However, importing through the IIBX takes longer and ties up working capital, according to Indian traders.</p>
<p>Gold imports dropped to between 20 and 22 tonnes in March and were estimated at around 15 tonnes in April – a 30-year low, excluding the COVID era. Imports were down from nearly 100 tonnes in January.</p>
<p>Interestingly, the halt in gold imports will likely have a positive impact on India’s trade balance. Gold is the country’s second-largest import behind oil. Some speculate that the government's foot-dragging is intentional to boost the country’s trade balance sheet.</p>
<p>Indians have an <a href="https://www.moneymetals.com/news/2026/04/07/india-allowing-gold-futures-to-back-etfs-004820">ongoing love affair with gold</a>. They value it for both cultural and economic reasons.</p>
<p>The yellow metal is deeply interwoven into India’s marriage ceremonies, along with its religious and cultural rituals. Festival seasons typically boost gold demand.</p>
<p>Indians also value the yellow metal as a store of wealth, especially in poorer rural regions. Around two-thirds of India’s gold demand comes from beyond the urban centers, where large numbers of people operate outside the tax system. Many Indians use gold jewelry not only as an adornment but as a way to preserve wealth.</p>
