How the government’s gold policies make India’s neighbours 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 a
bout 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.
True, the customs seize gold. But as a reply to the Lok Sabha on February 3, 2017 (in reply to the unstarred question no 387) showed, the government admitted that seizures were scant compared to the volume of gold that was being smuggled into India. The government admitted that the Income Tax Department conducted more than 1,100 searches, seizures and surveys and issued more than 5,100 notices, between November 2016 and January 2017, for verification of suspicious high value cash deposits in old high denominations.
Collectively, these raids and seizures accounted for valuables worth Rs. 610 crore which includes cash of Rs. 513 crore. Rest of the seized valuables worth Rs.97 crore was mainly in the form of gold, jewellery and silver. Of the 100 tonnes of gold smuggled in each year, the total seizure accounted for just 0.003 percent!.