Kotak Institutional Equities sees downside risk to its USD 88 billion forecast for India’s gold imports in FY27 after official monthly imports fell sharply from May, although festive demand could drive a recovery.
“We assume US$88 bn of gold imports in FY2027E; downside risks exist based on 5MFY27 trends although demand will pick up over the forthcoming festive season,” Kotak said in a strategy report dated September 23.
Gold imports stood at USD 17.5 billion in the first five months of FY27, compared with USD 16.9 billion in the same period a year earlier. Imports totalled USD 72 billion in FY26, according to the report.
Kotak said the recent monthly decline followed an increase in gold import duty from 6 per cent to 15 per cent on May 13. The higher duty raised domestic gold prices relative to global prices and may have deterred household purchases, it said.
The slowdown could also prove temporary if buyers are waiting for a possible duty cut. “Gold imports may recover to ‘normal’ levels if the government was to cut import duties,” the report said.
Kotak flagged a third possibility: the decline in official imports may partly reflect “diversion of gold imports to unofficial channels”. It cautioned that, if substantial trade has shifted outside official channels, the government could lose customs and goods and services tax revenue. However, the report did not establish that such a shift has occurred.
Kotak suggested that a change in the taxation structure could help reduce gold imports, encourage households to recycle existing gold and protect government revenue.
“We have long argued for higher GST rates and lower import duties on gold as an alternative route to (1) reduce gold imports, (2) increase household gold recycling and (3) protect government revenues,” the report stated.
Lower gold imports would help India’s current account balance, Kotak said, but the implications would depend on whether the decline reflects a lasting fall in demand, postponed purchases or trade moving to unofficial channels.