Gold News

India's Gold Policy 'Making Smuggling Worse' Says Minister

Gold smugglers "still ahead" as seizures up 40%, new PAN policy risks "black market" sales... 
 
GOLD POLICY in India – the world's No.1 consumer nation, but with zero gold-mine output – is worsening the country's smuggling and black market economy, a senior government figure has said.
 
The comments from Minister of State for Finance Jayant Sinha come as India's jewelry industry also warns that anti-gold measures, aimed at curbing India's huge current account deficit with the rest of the world, are only encouraging smuggling and illegal trade in the metal.
 
"From the increase in number and value of gold seizure cases," said Sinha on Friday in a written reply to questions in India's lower house Lok Sabha assembly, "it appears that the spurt in gold smuggling activity in recent years may be partly due to curbs imposed on gold imports."
 
Held at 10% in February's Budget – and disappointing industry forecasts of a cut for the second time in 9 months – India's high import duty on gold "has given rise to the creation of a parallel economy through smuggling," agrees Manish Jain, chairman-elect of the All India Gems & Jewellery Trade Federation (GJF).
 
The GJF is also campaigning against the government plan to make tax-office PAN cards mandatory for all gold purchases over 1 lakh, or 100,000 Rupees – currently around US$1,600.
 
Issued by the tax office, India's system of 'personal account numbers' (PAN) only covers some 11% of adults according to the GFJ. Most notably, India's rural population – who account for perhaps four-fifths of the nation's total gold demand – do not have PAN cards, because agricultural incomes are tax-free.
 
With some 16 million households recorded by India's 2011 census, the average family spent $2,800 on gold that year according to demand data from market-development organization the World Gold Council, falling nearer $2,000 per household in 2014.
 
If the PAN card requirement is passed, says the GJF's regional chairman for Chennai N.Ananthapadmanabhan, it "will only lead to a crippling effect on the industry."
 
A typical purchase of five British gold sovereign coins "cost 1.25 lakh," he adds. "People may prefer to buy gold without bill whenever their purchase crosses one lakh Rupees."
 
Finally moving on central-bank recommendations to 'monetize' India's existing private gold holdings running back to at least early 2013 – even before the strictest anti-gold import rules were imposed – the BJP government's Budget last month pushed for the launch of gold savings schemes at commercial banks.
 
Following relaxation of some anti-import rules, Bloomberg News reported in February, customs officers at Mumbai saw seizures of gold bullion drop to just 40 kilograms in January from a peak of 130kg last August.
 
"Customs and police have got wise to some of the tricks used to bring in gold," the Reuters news agency last week quoted Trade Minister Nirmala Sitharaman, telling parliament last week that total gold seizures across India rose 40% last fiscal year from the the year before.
 
But gold smugglers are still one step ahead, says the Times of India, reporting from Kolkata Airport that "it is difficult to monitor every staffer [and] bigger rackets are at work," in the words of one un-named official.
 
"The rackets [also] change their modes of operation frequently, making the task challenging."

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