Why Is India A Gold Smuggling Hub – Free PDF Download

Introduction

• India imports approximately 1,000 tonnes of gold every year, a quarter more than the official figures, said the report by Canada-based IMPACT.
• In its report, IMPACT said one third of global gold passes through India, the heart of the world’s gold manufacturing.
• Gold tied to “conflict, human rights abuses, and corruption in Africa and South America” enters India, is transformed into goods and then transported to international markets,
• Said the report by Canada-based IMPACT.
• The report recognises that the UAE is India’s largest source of smuggled gold.
• It said the UAE plays the role of an intermediary, importing gold doré without proper due diligence.
• The gold is then refined and exported to India, says the report.
• A doré bar is a semi-pure alloy of gold and silver.
• So what makes India so ‘attractive’ for gold smugglers?

Pricey duty

• Increase in customs duty last year from 10% to 12.5%,
• Along with a hike in GST from 1% to 3%, with an additional 5% GST on making of gold ornaments.
• All serve to ‘incentivise’ the smuggling of the yellow metal.
• Already gold prices is around Rs 50,000 per 10 gm
• Contrast this with the customs duty of 1% in the 1990s after the economic reforms that killed the gold smuggling market as imports were liberalised.
• The difference between gold imported legally and illicit gold can translate into a ‘profit’ of Rs 6 lakh for a kilogramme of the precious metal.
• Biggest Consumer Country
• Indian families are the biggest consumers of gold as a collective entity.
• Just under 24,000 tonnes of gold is owned by Indian families.
• This is equivalent to the combined gold reserves held by the “central banks of the United States, the Eurozone and China”.

Buying 24k gold in India is hard

• A lot of the gold being smuggled into Indian comes from Dubai or other Asian countries with better quality gold.
• A lot of the domestic gold in India is nowhere close to 24-karat.
• In fact, fake gold is a serious problem as in many countries.

Falsified paperwork

• Gold is either smuggled into India surreptitiously, “with tons of refined bullion evading the authorities”, or it simply enters with the help of “falsified paperwork”.
• The source of spikes in gold doré imports can be traced to countries that “lack strong internal controls or are linked to supply chains with weak evidence of due diligence”.

Easy to Smuggle

• Part of why smuggling continues to happen is due to a lack of oversight.
• Indian government regulations for checking baggage and following up on suspicious travellers is not as thorough as it needs to be.
• Of 150-200 tonnes of gold smuggled into the country annually,
• Based on the World Gold Council’s (WGC) estimates, just 2% of smuggled gold is seized by customs officials.

Porous borders with neighbouring counties

• India shares a land border with 7 countries, 6 of whom have extremely porous borders with India — Pakistan, Nepal, Bhutan, Bangladesh, Myanmar and China.
• Smugglers often re-route the gold via these countries.
• In fact, of late, according to the Directorate of Revenue Intelligence (DRI), there has been a spurt in smuggling of gold from China, Taiwan and Hong Kong, with couriers resorting to using e-commerce platforms to hide gold in white goods.

What can be done?

• The report makes two recommendations to address the issue of gold smuggling in India:
• The harmonisation of taxes, followed by
• An enhanced regulatory system at the border to filter falsified documentation.
• IMPACT also pushed for India’s gold industry to follow due diligence and discourage incentives for gold smuggling.
• Its report said, “Gold traders, refiners, and jewellers have a responsibility to understand, mitigate, and publically report on any risks in their supply chain—all the way back to the mine site.”

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