Gold smuggling in India is likely to jump by 50 per cent to touch 300 tonnes this financial year due to restrictions in imports through official channel.
“The government estimates gold import through unofficial channels at between 200-300 tonnes this financial year,” said Krishna Pratap Singh, additional director general of Directorate General of Export Promotion, while speaking on the sidelines of the India International Bullion Summit, a two-day seminar here on Saturday.
The World Gold Council (WGC) also forecast gold smuggling at over 200 tonnes this year as compared to 150-200 tonnes in the previous year.
There is no concrete figure in terms of quantity and value of gold smuggling into India. But based on exports from Dubai and other potential neighbouring countries, gold import can be safely estimated at around 300 tonnes this financial year. Some agencies, however, estimate gold smuggling even at 400 tonnes, Singh said.
To control the widening current account deficit, the government restricted gold import through introduction of the 80:20 rule and raising import duty upto 10 per cent last year. But the decision has opened unofficial channel import out of the government glare.
“There are reports of seizures of unofficial channel gold imports. Also, there are several agencies working to curb gold smuggling into India. But we are of the view that gold import through unofficial channels has increased,” Singh added.
Concerned with the squeeze in gold availability due to restrictions, Mehul Choksi, managing director of Gitanjali Gems demanded an immediate removal of supply curbs. “Instead of import duty, the government would have achieved the same result through raising Value Added Tax (VAT) to 10 per cent. Increase in VAT should have raised cost of gold for consumers without encouraging imports to fetch premium and higher cost through import of unofficial channel,” Choksi added.
P R Somasundaram, managing director of WGC, however, said that the curb on gold import has affected investment demand. But, looking at the revival in the world economy, the jewellery demand remained robust.
The liquidity crisis among individual consumers has affected gold purchases to some extent. But, we expect relaxation in the import curb by the January – March quarter of 2015, he added.