Gold Import Restrictions Will Ease Pressure On INR
FinTech BizNews Service
Mumbai, 16 May 2026: The latest edition of YES BANK’s ‘Ecologue’, provides a useful analysis on Trade Deficit, Gold and oil. The research report, has been authored by Indranil Pan, Chief Economist; and Khushi Vakharia, YES BANK:
Trade Deficit: Exports rise, NONG imports strong
India’s April trade deficit at USD 28.4 bn is higher than USD 20.7 bn in March. On the
import side, the surprise came from gold imports, higher than in March at USD 5.6 bn.
Exports grew 11.9% MoM alongside a robust growth in imports at 20.7% MoM. The
service sector net surplus was reported at USD 20.6 bn in April, shade lower from USD
20.9 bn in March. Significant steps have been taken now to contain gold imports and our
gold desk expects the import volumes to crash to around 420 tons from an estimated 720
tons in FY26. This correction led us to relook at our CAD numbers and at USD 85/bbl of
Brent crude, we expect CAD in FY27 at 1.5%, up from an estimated 0.9% in FY26.
Exports register strong growth of 11.9% for the month: Headline exports were up by 13.8%
YoY in April to USD 43.6 bn from a contraction of 7.4% YoY in March. Non‐oil exports rose
0.7% MoM to USD 34 bn, continuing the upward momentum of the previous month. Oil
imports registered a strong growth of 85.1% MoM to USD 9.6 bn. Of the 31 items, 18 items
registered sequential upticks. Gems and jewelry (+13.6%), electronic goods (17.4%) and
Iron ore (+18.9%) registered sequential upticks amongst non-agricultural products. Highest
rise was observed in petroleum product exports registering a growth of 85.1% MoM in
April from 51.3% MoM in March, mainly due to higher prices.
Imports witness a sharp uptick at 20.7% MoM:
Imports stood at USD 71.9 bn in April, growing 10% YoY from a contraction of 6.5% YoY in the previous
month. NONG imports remained strong at USD 47.7 bn and grew 7.5% for the month. Within NONG imports,
chemical & material products (+24.1% MoM), transport equipment (+28.6% MoM), sulphur & unroasted Iron Pyrites (+37.1% MoM) and project goods (+573.2% MoM) witnessed highest sequential gains. This was possibly due to higher prices, but also points to expectations of relative stable growth in India. Oil import bill widened to USD 18.6 bn in April from USD 12.2 bn in March as we saw some movement through Strait of Hormuz over ceasefire announcement. In March, data had indicated almost halving of LPG volumes imports compared to February, while crude volume imports were also reported lower.
Net Services Balance on a strong footing:
Services exports contracted marginally by 2.5% MoM in April 2026 to USD 37.24 bn, slightly lower than
38.2 bn in March. Services imports were at USD 16.7 bn (-3.2% MoM), leading to a net services surplus
of USD 20.6 bn (USD 20.9 bn in March) On a YoY basis, services exports grew 13.4% (7.3% in the previous
month), while services imports declined 1.5% (-1.6% in the previous month).
New regulations for gold imports to contain CAD: Gold imports for April stood at USD
5.6 bn, a strong 83.8% MoM growth and a share of 7.8% in total imports. In FY26 average
gold imports stood at 8.9% of total imports, higher than 7.8% in FY25 and 6.6% in FY24.
India remains one of the largest bullion markets and thereby weighs heavy on the import
bill. Given the continuing depreciation pressure on the currency, and with little wriggle
room to increase capital flows, the government has decided to tighten the gold import
volumes to gain some comfort on the CAD. Thus, government has hiked import duty on
gold and silver imports to 10% from 5%, and Agricultural and Infrastructure Development
Cess (AIDC) to 5% from 1% earlier, taking the total effective import duty to 15% with effect
from May 13. Further, import quantity restriction of 100 kg has been imposed on
manufacturers, including in SEZ under Advance Authorization scheme. Subsequent
authorizations are only permitted if at least 50% of export obligations under previous
licence has been utilized. These measures come on the top of dore importers awaiting
licence renewals and the earlier waiver given to banks on IGST payments have not been
reinstated. Our gold team thinks that with all these restrictions, the volume of gold imports
can crash to 420 tons in FY27, from 720 tons in FY26.
Some comfort for CAD, but challenge on the capital flows may continue:
Incorporating the volume view from our gold desk, we now anticipate gold imports to value at
USD 57 bn, compared to our earlier estimate of USD 80 bn, a savings of around USD 23 bn. The
price hike on petrol and diesel, however, is not expected to lead to significant gains in terms
of lowering crude import volumes. Our calculations now indicate a CAD/GDP of 1.5%,
from our earlier estimate of 1.8%, with assumption of oil at USD 85/bbl. The challenges on
the capital account side are expected to continue, though the BoP deficit is now anticipated
lower at USD 30 bn in our base case situation. Though gold import restrictions would ease
the pressure on INR, USD/INR depreciation is expected to continue basis the BoP gap. We
anticipate USD/INR at 97.00-97.50 at around the half year mark.
