India's Gold Smuggling "Rises 7-Fold", Import Ban "Hits Only Official CAD"
Wednesday, 12/04/2013 13:24
India's current account deficit falls sharply, gold smuggling overtakes drugs says official...
GOLD SMUGGLING into India, formerly the world's No.1 consumer nation, has risen 7-fold as a result of the government's 2013 rules on gold imports, according to customs officials.
That means the impact on India's outflow of foreign currency, previously needed to pay for legal gold imports,
shows only in official data, notes the
FirstPost news-site.
Effectively closing legal flows mid-year, and then halving visible gold imports year-on-year in the second half of 2013, the government rules include 10% import duty, which gold dealers and customs officials say has only increased potential profits for criminal gangs.
"Government should bring down the import duty," says Kumar Jain of the Mumbai Jewellers Association. "[That] will minimise the price gap" between legal and smuggled gold, "and in turn help in curbing smuggling."
"Gold smuggling has become more profitable and fashionable," says Kiran Kumar Karlapu of the Air Intelligence Unit in Mumbai.
"There has been a several-fold increase in gold smuggling this year after restrictions from the government, which has left narcotics behind."
Customs officials cite Dubai and Sri Lanka as key points for gold smuggling into India this year. Singapore
gold dealers also report large orders perhaps destined for India.
Market-development group the World Gold Council notes a rise in gold imports to Thailand, which may also be explained by illegal shipments on to India.
Officially, India's current account deficit – the gap between inflows and outflows of money, driven in large part by trade in goods and services – has fallen substantially this year.
The government, and many analysts, attribute much of this fall, with the CAD shrinking from 5% of India's gross domestic product in July-Sept. 2012 to just 1.2% of GDP during the same period this year, to the clampdown on legal gold imports.
But this "major fall in gold imports doesn’t necessarily mean a fall in gold demand," says FirstPost, adding that "an increase in gold smuggling has huge social implications."
The Economist magazine recently noted that India, the world No.1 gold consumer until 2013, only
saw annual legal imports of 65 tonnes of gold prior to the 1992 reforms.
"Though the quantum of seizures has increased [in 2013]," says a customs and revenue officer in Mumbai, "in our opinion it reflects only 1 to 2% of total smuggling."
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