Seizure of smuggled gold in India soared 365 percent in the first quarter of the year, a report said Saturday, following curbs on imports of the precious metal to plug a yawning trade gap.
India, the world’s largest buyer of gold, has twice hiked import taxes on bullion this year to discourage gold-buying and introduced other restrictions on purchases to rein in a record current account deficit, the broadest measure of trade.
Gold is hugely popular in India, especially during religious festivals and wedding seasons.
In the April to June quarter of this financial year seizure of smuggled gold rose 365 percent over the same period last year, the Business Standard newspaper quoted a government revenue department official as saying.
“This year, in the first quarter itself, we have seized almost 60 percent (in value terms) of what was seized in all of last year,” an unnamed government revenue official was quoted as saying.
Many Indians — especially in rural areas where there are few banks — buy gold as a hedge against inflation which has been stubbornly high.
Gold imports fell from 162 tonnes in May to 31 tonnes in June after government moves to restrain gold buying. Import duties on gold now stand at eight percent.
But gold may now be being smuggled instead of being officially imported, revenue department officials warned.
Gold is India’s second-biggest import after oil. The commodities are the biggest contributors to India’s current account deficit which hit a record 4.8 percent of gross domestic product in the financial year ending March as imports outpaced exports.
According to estimates, just five to 10 percent of smuggled gold is caught by Indian authorities, the newspaper said, even though vigilance has been stepped up at customs.
In recent months, travellers have been caught smuggling gold in their clothing, concealed as television parts, and as staples with silver coating.
Finance Minister P. Chidambaram last month implored Indians to “resist the temptation to buy gold” with the rupee’s value also slumping.
“India does not produce an ounce of gold. You pay in rupees, but the government has to spend dollars to buy gold,” Chidambaram said.
But a fall in international gold prices this year has whetted Indians’ interest in bullion, officials say, making it harder to combat buying.
Ratings agencies have threatened to downgrade India’s sovereign investment rating to junk status unless the government improves the nation’s finances, including its current account deficit.