Role of Government Policies and Regulations on the Gold Market in India 

Gold is the second largest commodity that India imports. Government policies and regulations influence the gold market heavily. During the previous decade, the gold industry experienced a noteworthy shift, pushed by modifications in government rules promoting a more organised market. Retail jewellers or gold selling companies now focus on offerings and providing value and diversity to the customer base. 

This post will discuss the role of government policies and regulations on the gold market in India and what influences the gold price. Furthermore, it will cover the importance of gold in the economy.

Importance of the Gold Market in the Economy

  • Yellow metal can turn into a stimulus for economic growth. The gold market is an integral part of the Indian economy, contributing 1.3% to the Indian GDP (Gross Domestic Product). Artisans, artisans and traders get significant employment opportunities in India. The gold market is also an avenue for millions of businesses of different sizes.
  • India is among the largest consumers of gold across the globe. Gold is essential in terms of cultural and historical significance. Indians share a strong affinity with gold as it is integral to religious ceremonies and festivities. Gold is cherished as both an adornment and an investment in India. 

Role of Government Policies on the Gold Market

  • Import Duty on Gold 

Government policies on import duty on gold can significantly impact gold rates and demand. When the government increases the import duty on gold, it makes gold import in India more expensive for gold selling companies. It decreases the demand. Currently, the government imposes around 12.5% import duty. 

The government plans to reduce the import duty because higher taxes makes gold more profitable for smugglers as they offer hefty discounts. The reduced duty on gold can raise retail sales and support global prices. Moreover, operations of local gold refineries will be revived with this cut.

Read Also:- White Gold vs Yellow Gold: What’s the Difference?

  • Gold Monetisation Schemes 

Gold Monetisation Scheme allows earning interest on idle gold lying in lockers or at homes. The scheme aims at mobilising idle gold lying with households, temples, institutions, or corporates in India for productive pursuits. It also results in less reliance on gold imports in the long run. Furthermore, it is considered a great process to fund infrastructure development in India and boost the economy.

  • Trade Policy 

Restrictions on tariffs and trade can affect the demand for gold as it impacts the global economy. With increased trade tensions, most investors can consider gold as a safe avenue that leads to a rise in the gold rate.

  • Impact of Government Policies on Gold Smuggling 

Gold smuggling affects the customers, the given market, and the government exchequer. Reports say the current 18.45% tax rate makes illegal gold cheaper by a margin of Rs 200/gram. Around 200-300 tonnes of gold is being smuggled into India, causing a loss of Rs 20,000 crore to the taxman in 2021. It disrupts the market by denting the market share of refiners and banks. The government can bring the tax rate to below 12%. Rationalised taxes would be helpful to eliminate smuggling matters and capture crucial transactional details. The structured manner will improve the fungibility of gold.

  • Monetary Policy 

Monetary policies of the Reserve Bank of India (RBI) can impact the gold rate, for example, a change in interest rates. An increase in money supply due to lower interest rates can make gold a more attractive investment avenue. The gold price can rise with increased demand.

Investors can seek gold for relative safety during an uncertain market due to geopolitical policies or crises. It will ultimately increase the gold price. 


The effectiveness of government policies on the gold industry depends on several factors. Customers looking to sell gold near me should consider the current economic conditions to maximise their valuables. 

You must consider renowned gold-selling and buying companies utilising the latest technologies to measure the weight and purity of gold. They provide gold value based on real-time market price.

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