Nirmala Sitharaman - budget
India's Finance Minister Nirmala Sitharaman arrives to present the 2019 budget in Parliament, New Delhi, July 5, 2019.Reuters

India has raised the import duties on gold and other precious metals to 12.5% from 10%, Finance Minister Nirmala Sitharaman said in her first federal budget speech on Friday, which may boost smuggling in the world's second-biggest bullion consumer.

Shares of jewellery makers such as Titan and PC Jeweller fell as much as 5 percent 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.