Editorial

The Government of India’s decision to raise the effective import duty on gold and silver to 15% from 6%—through a 10% basic customs duty and 5% Agriculture Infrastructure and Development Cess—marks a sharp policy response to mounting external sector pressures. Effective May 13, 2026, the move aims to curb non-essential imports, ease the burden on foreign exchange reserves, and support a rupee that has touched record lows amid geopolitical turmoil in West Asia.

In the current context, the rationale is compelling. India remains the world’s second-largest consumer of gold. Surging bullion imports, even at elevated global prices, drain precious dollars at a time when crude oil prices have spiked due to disruptions in the Strait of Hormuz and broader regional instability. Higher energy import bills have widened the trade deficit and current account deficit, exerting relentless downward pressure on the rupee. Gold, largely a consumption and investment good rather than a productive input, exacerbates this stress. By making imports costlier, the government seeks to moderate demand, conserve reserves, and send a strong signal of fiscal prudence—echoing Prime Minister Modi’s recent appeal for restraint in gold purchases.

Early market reactions validate the intent: domestic gold prices jumped sharply post-announcement, potentially cooling retail and investment demand. In theory, this should help narrow the current account gap and bolster currency stability without immediate monetary tightening.

Yet, history cautions against over-optimism. Past duty hikes have often produced mixed results. Indian households’ cultural affinity for gold runs deep—weddings, festivals, and savings habits do not vanish with higher taxes. Instead, demand frequently shifts to the grey market. Smuggling could surge, undermining legitimate jewellers, reducing GST and other tax collections, and creating new law-enforcement challenges. Jewellery exports, which rely on imported raw material, may also lose competitiveness despite duty drawbacks.

The policy is a short-term palliative, not a structural cure. India’s external vulnerabilities stem more from energy dependence and export competitiveness than gold alone. Sustainable relief demands accelerated domestic oil and gas production, renewable energy push, and export diversification. Encouraging financial savings through deeper penetration of mutual funds, sovereign gold bonds, and digital gold could gradually wean consumers off physical bullion.

The 15% duty hike reflects responsible stewardship during turbulent times. It buys breathing space for the rupee and reserves. However, its success hinges on complementary measures: transparent monitoring of smuggling, support for the organised jewellery sector, and long-term behavioural shifts in savings patterns. Without these, the government risks merely redistributing—rather than reducing—the economic pain. In an uncertain global environment, pragmatism must be paired with persistence.

As temperatures soar past 45–47°C in places like Banda in Uttar Pradesh, North and Central India are in the grip of a severe heatwave. The India Meteorological Department (IMD) has issued warnings for heatwave to severe heatwave conditions across Rajasthan, Uttar Pradesh, Madhya Pradesh, Delhi, and parts of other states. Hot and humid conditions exacerbate discomfort along the coasts. With monsoon relief not expected until late May, this early summer onslaught tests the resilience of millions.

The human cost is immediate and stark. Outdoor workers, the elderly, children, and those with pre-existing conditions face the highest risks of dehydration, heat exhaustion, and life-threatening heatstroke. Warm nights deny the body much-needed recovery, compounding cardiovascular strain. Hospitals are preparing heatstroke units, and the Health Ministry has urged states to activate heat action plans, stock ORS, and disseminate advisories. Yet enforcement on the ground remains patchy. Daily wage labourers and street vendors have little choice but to brave the sun, highlighting deep inequalities—air-conditioned malls at 18°C versus pavements at 45°C.

This is no longer a seasonal inconvenience but a recurring climate emergency. Scientists link longer, more intense, and earlier heatwaves to global warming. Urban heat islands, deforestation, and concretisation worsen the impact. The 2026 spell, arriving amid geopolitical energy uncertainties, also strains power grids as cooling demand spikes, risking outages when they are needed most. Agriculture suffers too—rabi crops face heat stress, threatening yields and inflating food prices.

Short-term measures are essential: strict workplace guidelines limiting outdoor activity between noon and 4 PM, widespread public hydration camps, and school timing adjustments. Long-term adaptation is non-negotiable. Cities must prioritise cool roofs, urban forests, and water bodies. Heat-resilient infrastructure, mandatory worker protections in the informal sector, and better forecasting integration with public health systems are critical. Encouraging traditional architecture and sustainable cooling can complement modern solutions.

The approaching monsoon offers temporary respite, but it brings its own challenges of floods and landslides. This cycle of extremes underscores the urgency of climate action—both mitigation through cleaner energy and robust adaptation. Governments, communities, and individuals must move beyond reactive alerts to systemic resilience. India’s demographic dividend and economic ambitions cannot thrive in unsustainable heat. The current heatwave is a warning: without urgent, coordinated action, future summers may test not just endurance but survival itself.

• SAS Kirmani