India has increased its import duties on gold and silver in a bid to shore up the falling value of the rupee and shore up foreign reserves battered by war in the Middle East.
Gold imports are financed through dollars, meaning buyers must tap into foreign reserves or convert rupees to make purchases.
Prime Minister Narendra Modi had already days ago appealed to the public to avoid buying gold for a year, as the rupee’s year-long slide against the dollar has worsened amid the Iran war.
The government more than doubled import duties on gold and silver to about 15% from the existing 6%, according to two official orders issued late Tuesday.
The energy supply crisis caused by the Middle East war’s 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 oil importer, and the high oil prices have hit the country’s foreign exchange reserves.
Increased 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 cut back on petrol and diesel consumption in response to supply disruptions due to the Middle East war.
Gold, seen as a symbol of wealth and prosperity and widely used during weddings as well as festivals, ranks second among India’s imports, after crude oil.
