How the government’s gold policies make India’s neighbors richer and this country itself poorer.
In 2013, the UPA government imposed a 10 percent import duty on gold. P Chdambaram, the then finance minister was quite savvy about the way financial markets work.
He knew too well, that any import duty above the 5 percent threshold, would inevitably draw the attention of smugglers. But he hoped that official imports would reduce because of the higher duty, and consequently the current account deficit (CAD) would narrow. In his effort to spruce up the books of accounts, Chidambaram ended up making smuggling very lucrative for traders.
Gold has a special appeal for smugglers because it has a high value despite a low volume. That makes the smuggling in of gold easy — through airports, through passengers as part of personal gold, or even through carriers. Sometimes, when the contraband is large enough, it comes through dhows as well, and the metal is landed somewhere along the porous coastline of India.