The numbers don’t lie. India’s official monthly gold imports crashed to $2 billion in June 2026, a steep drop from the $7.4 billion recorded just four months earlier in February. This isn’t a gradual taper; it’s a cliff. According to a research note by Kotak Institutional Equities released on Friday, September 25, the decline correlates directly with the import duty hike implemented on May 13, 2026, which pushed domestic gold prices 9% above global benchmarks.
But here’s the catch. Kotak argues that the official data might be telling only half the story. The brokerage warns that the sharp drop in legal imports could signal a massive diversion of demand to unofficial channels. If households are bypassing customs to avoid the higher duties, the government is losing significant customs and GST revenue. The analyst team notes that this 'ugly' scenario contradicts the intended fiscal policy, turning a deficit-reducing measure into a revenue leak.
The 'good' scenario, per Kotak, is that this represents a permanent reset in household behavior. The shift away from physical gold toward ETFs—evidenced by the sharp drop in ETF inflows since February—suggests investors are reacting to trailing returns rather than just price shocks. However, the 'bad' scenario remains equally plausible: buyers are simply pausing to digest the one-time price jump or fear a future duty cut that would make their recent purchases overvalued.
Watch the upcoming budget and policy announcements closely. Kotak has long advocated for a structural shift: higher GST rates paired with lower import duties. This strategy aims to reduce smuggling incentives while protecting tax collections by broadening the base. If the government sticks to the current high-duty, low-GST structure, expect the gray market to keep growing. For traders, this volatility in the physical market will continue to pressure domestic gold prices, creating a divergence from global trends that could persist through the remainder of 2026.