Government's anti-import rules curb legal gold flows, not demand...
GOLD BULLION smuggling to India – the world's No.1 consumer nation in 2012 – is rising, according to official sources, even as legal imports also rose this month after June's sharp drop.
"Smuggling of gold seems to be increasing month on month," the Wall Street Journal meantime quotes what it calls a senior official in the Department of Revenue Intelligence, a part of Chidambaram's finance ministry.
Trying to cut India's large deficit on the 'current account' of incoming and outgoing money, Chidambaram's government this spring imposed a series of strict anti-gold measures.
First import duty on gold bullion was raised to 8% by value, extending the hikes of 2012 from a starting level equal to 1%. Then importers were required to pay in advance, in full – rather than using credit – for gold bullion
Earlier in July, the Reserve Bank of India then said 20% of all gold bullion imported to India must now be set aside – in bonded warehouses – for re-export, effective immediately.
Gold smuggling was big business in India prior to deregulation 20 years ago. Last year, official gold bullion imports totaled almost 1,000 tonnes – nearly 1 ounce in every 4 sold worldwide.
April to June saw 32 people arrested for gold bullion smuggling, the unnamed Revenue Intelligence source says. That compared with just four arrests in the same quarter of 2012.
Customs officials seized 10 times the value of gold versus a year earlier, too.
Ahead of the Indian governments new anti-import measures, official gold bullion flows rose sharply, hitting all-time highs in April and averaging 152 tonnes in the two months to June.