India has started making physical checks of gold stocks held by wholesalers, to ensure inventories tally with the amount imported through legal channels, an industry association said.
The checks are part of efforts aimed at curbing gold smuggling in the world's second-largest bullion consumer.
However, the move could aggravate bullion shortages in the physical market as authorities confiscate gold without a valid provenance, boosting premiums, which rallied to a record of $160 an ounce on London prices in late 2013.
Gold premiums hover at $80 an ounce.
Gold was being seized where numbers do not match up, said India Bullion and Jewellers Association (IBJA) general secretary Surendra Mehta.
The association's 1,200 bullion dealers and jewellery retailers plan to down shutters on 10 March in protest over the spot checks and import restrictions.
Pursued by Reuters, officials from India's customs department were not immediately available to comment.
A majority of all legal imports into India are channelled through either state-run or private foreign banks, or government-backed trading firms, which in turn sell the yellow metal to local jewellers.
Mehta said legally imported gold bought by retailers, from middlemen, was also being caught up in the checks.
"Government agencies are raiding and seizing gold at various places and asking to reconcile the (gold bar) number with the imported gold," Mehta told the news agency.
"My 125 kilograms (4,400 ounces) of gold has been stuck at Ahmedabad airport unnecessarily for a month now," said Prithviraj Kothari, owner of Riddhisiddhi Bullions, a leading jeweller.
To tackle a widening trade deficit, Asia's third-largest economy rolled out measures to discourage gold buying, moves that have flooded the market with smuggled gold.
Three upward revisions to the import duties on gold in 2013, to a record 10%, and restrictions tying purchases to exports, have resulted in an almost 90% drop in the imports of the yellow metal in the six months to November 2013.
However, while official imports in 2013 were pegged at 750 tonnes, up to another 200 tonnes was believed to have been smuggled into the country, the World Gold Council estimated.
Customs officials have said that only a fraction of all illegal shipments have been discovered.
The finance ministry and the central bank have acknowledged that smuggling has increased considerably but have said they would not ease the import curbs until they have a better grip on the trade gap.