India Gold Smuggling Adds $1bn to CAD
Tuesday, 1/28/2014 11:03
Customs seizures triple, equal 3-8% of total says finance minister...
GOLD smuggling to India – the world's largest consumer nation – may have equaled $1.1 billion by value since legal imports were effectively banned last summer, analysis of Finance Ministry estimates by BullionVault shows.
"I know gold smuggling has increased," said India's finance minister P.Chidambaram on Monday.
"But the
restrictions on gold import were absolutely necessary," he went on, blaming gold for India's current account deficit – the gap between inflows and outflows of money – which yawned to 4.8% of the country's GDP last fiscal year, worth some $88.2 billion.
"These restrictions," says Chidambaram, "have brought down gold import, which in April and May had crossed 300 tonnes.If we had not imposed restrictions, there was no way we could have managed balance of payments or the CAD."
With India's gold import duty now set at 10% by value, local premiums to the international price peaked in October, just before the main gold-buying festival of Diwali, at $150 per ounce.
Last week the government of neighboring Pakistan enforced
a "temporary" ban on all gold shipments, aiming to stem the illegal flow of metal across its border into India.
Speaking Monday, Chidambaram repeated his Ministry's previous estimate of 1-3 tonnes of illegal gold being smuggled into India each month since the strictest anti-import rules were imposed last summer.
Those figures are substantially below the
250-tonne estimate of 2012-2013 smuggling made to the
Business Standard last February by Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation (GJF), which represents 40,000 members across the industry.
At average prices across the year, Chidambaram's current estimates would still add between $0.4 and $1.1bn to the Current Account Deficit for 2013-2014, which the finance ministry believes will shrink to $50bn this year.
Citing "official sources", a separate report from the Press Trust of India says this fiscal-year, running to the end of March, has seen "as many as 700 cases" of smuggled gold being seized by customs and revenue staff across India.
That compares with 870 cases in 2012-2013, the PTI says, and puts the number of India's gold smuggling seizures cases on course for a 4% drop for the full year.
By value, in contrast, 2013-2014 has seen customs officers seize gold worth 150% more, the PTI report says, pricing this year's seizures at INR 2.5 billion ($39m). Based on average prices, and with two months of the fiscal year still to go, that means seizures by weight have nearly tripled already to 0.95 tonnes.
Equal to between 3-8% of Chibamdaram's smuggling estimate, that figure would stand at just half-a-percent of the 2012-2013 estimate from the GJF's Bamalwa.
Last month, says a separate article from the Times of India, "almost every passenger on a flight from Dubai to Calicut was found carrying 1 kg of gold each" by customs officials, who imposed a legal levy for carrying gold bought for personal ownership into the country.
Email us