Informal Gold Purchases Surge to 29% Ahead of Dhanteras Following 15% Import Duty Hike

Cash is king in the bullion alleys this festive season. Nearly three in ten consumers buying gold for Dhanteras on November 6 intend to bypass formal jewellery showrooms entirely, purchasing unbilled metal through informal grey-market dealers to sidestep punishing tax spreads.

A comprehensive survey by LocalCircles spanning 312 districts and 21,651 respondents revealed that 29% plan to execute under-the-counter transactions without tax invoices, leaving 71% committed to buying through compliant jewellers. The flight to informal desks comes six months after the government hiked customs duty on gold from 6% to 15% on May 13 to preserve foreign exchange reserves and cushion the rupee. Combined with 3% Goods and Services Tax, the duty expansion widened the price gulf between legal imports and smuggled bullion to nearly 18% — handing bootleg networks an irresistible arbitrage margin.

Parallel markets moved swiftly to fill the gap. Unofficial gold inflows leaped more than 1,500% year-on-year to approximately 50 tonnes during the July-September quarter, up from just 3 tonnes a year earlier, according to the World Gold Council's Q3 2026 Gold Demand Trends report. Legal shipments bore the brunt of the divergence. Official net bullion imports slumped 46% to 114.1 tonnes over the same stretch.

The Bullion Squeeze in Numbers

The double blow of elevated international spot prices and domestic tariffs took a heavy toll on physical consumption volumes across India's wholesale and retail counters.

Soaring spot quotes cushioned the top line for organized jewelers even as footfall thinned. Consumer spending reached ₹2.42 lakh crore, edging up 3% in value terms despite the 29% volume drop. But the underlying mechanics signal deep consumer fatigue, particularly in retail bar and coin investments, which contracted 40% to 55 tonnes.

The Policy Dilemma: Smuggling thrives when tariffs cross double digits. LocalCircles found that 66% of surveyed households now demand sharper state intervention against the illegal trade. Exactly 37% favoured police and customs crackdowns on syndicates, 29% pressed the Centre to lower import duties, and 17% sought punitive action against retail vendors of unbilled stock. Another 12% urged a dual approach pairing enforcement with tariff cuts, while 5% backed buyer-education campaigns.

Bullion trade bodies and organized jewellers spent late summer lobbying North Block to reverse the May decision and restore the baseline 6% tariff before festival footfall peaked. While discussions circulated across market desks through August regarding a potential duty rollback, the government held rates steady as of November 4. With Dhanteras trade kicking off, retail volume will test whether organized jewellers can defend their market share against the surging cash economy.