Indians love gold since ancient times. Almost every Indian will possess some amount of gold in one form or the other. It is purchased as hedge against inflation. It is also purchased by the parents of a bride to be given to the daughter as part of her marriage dowry.
With a growing population and increasing purchasing power the appetite for gold consumption in India is simply increasing every year. In the past few years India has seen gold imports in the range of 800 to 900 metric tons per year. It is sometimes either ahead or just behind China, anothergold hungry country. Such high imports to the tune of $ 50 - 60 billion annually have resulted in gold being second after petroleum imports which are around $ 120 - 130 billion. Gold imports account for nearly 11-12% of the foreign exchange out go in our country's annual imports
Gold imports do not lead to creation of productive assets. This is because it is purchased and safely stored for years and years. Petroleum products and so many other products on the contrary are used as productive assets which contribute to the growth of the economy. Also such high gold imports also lead to widening of the Current Account Deficit (CAD) and puts stress on the weak rupee to suffer further devaluation against the dollar.
Before the gold imports were permitted by citizens and institutions some years back, the demand for gold was met by smugglers.It was a flourishing industry and huge quantities of gold were pushed illegally into India from West Asia based operators in league with local smugglers etc.In return Indian silver was smuggled out towards payment for the gold. This nexus operated for nearly four decades till the economy was liberalized in 1992.
Vast sums of money were made and some smugglers have become legendary and movies also have been made on them or on the theme of smuggling. The also developed political
However since last year the government has been trying to reduce the import of gold to contain the CAD and improve the overall economy. This has resulted in shortage of gold coming in via the official route. Official gold imports are less than last year. However opposite is the case with unofficial gold imports.
Gold smuggling is picking up again.It is reported that their has been a five fold increase in illegal gold seizures in 2013-14 over 2012-13 period by government agencies.. As against Rs 100 crore worth gold seized in 2012-13, gold worth Rs 565 crore has been impounded in 2013-14.
This goes to show that the government has by increasing duty on gold imports given a fillip to the smugglers to start moving contraband gold in larger volumes into India. It is estimated that nearly 3,000 kg of gold is smuggled into the country every month. At this rate and at present prices the quantum of gold smuggled could be more than Rs 9,000 crore in last fiscal.International sources are stating a much higher figure.
One can only hope that smuggling of gold does not reach the level of operations it had in its hey day only two decades back.The illegal finances had given rise to number of gangs especially in the financial capital of Mumbai. These gangs were a law unto themselves and some of them also indulged in anti national activities.activities.
The new government should look into meeting the insatiable demand for gold amongst the Indians by legitimate means and not unwittingly support the rise of another class of smugglers, especially when the Indian economy is poised for higher growth and trying to seek a place of respect in the committee of the nations.