India’s neighbouring countries have seen a surge in their imports of the metal. This gold is then being…

The correct choice is: “There is a duty differential between India and its neighbouring countries.”

Gold is imported legally into the neighbouring countries and then smuggled into India. That is only worthwhile if gold costs more in India than next door, which most directly points to higher duties or tougher import conditions in India than in its neighbours, i.e. a duty differential.

“The tough restriction on the metal’s imports could be eased” is a suggested policy response, not an inference from the facts. “India has a high current account deficit” and “There has been a sharp depreciation of the rupee” may be part of the wider economic background, but nothing in the statements shows them.