India has raised its import tariffs on gold and silver in an effort to shore up the weakening value of the rupee and bolster war-hit foreign exchange reserves in the Middle East.
Gold imports are financed by dollars, meaning buyers have to spend foreign exchange reserves or convert rupees to make purchases.
Prime Minister Narendra Modi had already appealed days ago to the public to avoid buying gold for a year as the year-long decline of the rupee against the dollar has worsened during the Iran war.
The government more than doubled taxes on gold and silver imports to around 15% from the existing 6%, according to two official orders issued late Tuesday.
The energy supply crisis caused by the closure of the Strait of Hormuz, through which a fifth of the world’s crude oil passed, during the Middle East war, has hit India hard.
India is the world’s third-largest oil importer and the rising cost of oil has hit its foreign exchange reserves.
High crude oil prices have increased India’s import bill, putting additional pressure on the country’s balance of payments and foreign exchange reserves.
Modi on Sunday urged the people of India to reduce consumption of gasoline and diesel in response to supply disruptions due to the war in the Middle East.
Gold, seen as a symbol of wealth and prosperity and widely used during weddings and festivals, ranks second among India’s imports after crude oil.
