India may become Gold smuggling hub

NEW DELHI(BullionStreet): World's largest gold buyer, India could become a hub for gold smuggling unless it quickly revamp the present scenario in country's gold markets, analysts said.

India has taken steps like raising the import duty to restrict gold imports after imports climbed sharply last year to around 830 tons.

Recent restrictions on gold imports will encourage smuggling and grey markets activities in the country, analysts said.

They added that reports of gold smuggling are pouring in from different parts of the country ever since the government began to impose stricter sanctions on gold imports.

Earlier, a report by Thomsun Reuters said India could receive up to 140 tons of smuggled gold this year an increase of 40 per cent.

According to All India Gems & Jewellery Trade Federation (GJF), gold consumption has gone up despite increase in the import duty from one per cent to eight per cent in January last year.

They called for ban on the gold imports intended towards parking of large funds in the form of raw bullion and other precious metals by HNIs (high networth individuals) and institutions.

This will reduce imports by 75 to 150 tonnes per annum (about 25 to 30 per cent). Besides, steps should be taken to stop sale of gold bars by unregistered dealers and star trading houses, if they are not operating in the G&J (gems and jewellery) sector, it demanded.

Meanwhile, a top official from India's finance ministry said the country is unlikely to ban gold imports or increase import taxes on the metal further, as that may lead more gold smuggling.

The official added that the government has limited options to stall a record fall in the rupee. The rupee has fallen to 59.9350 to the dollar.

Higher trade deficit in turn has put pressure on the Current Account Deficit (CAD), which has been described as the biggest risk to the Indian economy by the Reserve Bank.