Shares of jewellery makers such as Titan and PC Jeweller fell as much as 5% after the announcement.

Jewellery trade associations have asked India's government to reduce gold import duties, which has caused a surge in smuggling.

India, which vies with China as the world's top gold consumer, raised import taxes on the metal to 10% in a series of hikes to August 2013 as policymakers attempted to narrow a gaping current account deficit and arrest a decline in the rupee.