The notification reported on Thursday, May 14, applies to imports under the advance authorization route, typically used by exporters to bring in duty-free gold for processing. [1]  It follows a series of escalating measures.

Two days prior, India more than doubled import tariffs on gold and silver to 15% and 6%, respectively, as Prime Minister Narendra Modi urged citizens to forgo gold purchases and unnecessary foreign travel to help stabilize the currency. [2] [3] The rupee has fallen to record lows against the U.S. dollar, driven by higher oil import bills amid the Middle East conflict and foreign-exchange outflows. [1]

Background: Rupee Weakness and Gold as Key Import

India, the world's third-largest oil importer, has been hit hard by energy disruptions in the Persian Gulf, according to reports. [1] The current account deficit, which includes the trade balance of goods and services, has widened as oil costs rise.

As Singh Kavaljit explains in "Taming global financial flows," the current account comprises merchandise and invisible accounts, and widening deficits put pressure on currency reserves. [4] Gold is India's largest import after crude oil, and demand has shifted from jewelry to investment holdings, with a growing share of imports moving into financial holdings including ETFs, according to UBS analysis cited by ZeroHedge. [1]