Gold Import in Official and Smuggling Route Rise as Price Falls to $1200

Gold imports have jumped by around 450 per cent year-on-year in September touching $3.75 billion. The figures is double that in the previous month of August. (This is inspite of the many non tariff restrictions like matching imports with exports).

“There were 2,150 seizures of gold made by the DRI across the country worth over Rs 600 crore in the last six months. This is huge when compared to 500 seizures worth Rs 150 crore made last year during the same period,” This is when DRI can lay its hands on less than five percent of smuggled gold.

In the Budget 2014-15, the government did not reduce the import duty on gold despite the current account deficit (CAD) coming down to 1.7 per cent in 2013-14 from a high of 4.8 per cent in 2012-13. It did not want to forego the revenue from the import.

Last year, the government had taken a slew of measures, including raising the import duty to 10 per cent in phases and restrictions on import, to cut down gold imports. However, the measures led to a rise in smuggling which figure has only risen.

Gloom Ahead

Total gold exports from Switzerland have doubled from 3 billion Swiss francs in August to 6.4 billion Swiss francs in September. This shows the gloom descending on the world economy following scaling down of growth forecasts. Very soon, the prices will rise if growth does not pickup.

Other Asian countries such as China, Hong Kong, Thailand and Singapore have also upped their share substantially.

For instance, in August, Hong Kong imported about 100 million Swiss francs worth of gold, which shot up to around 900 million Swiss francs in September. Thailand and China, too, witnessed a similar surge.

India’s share in Switzerland’s gold exports in fact dropped to 34 per cent in September from 37 per cent in August. 

The increase in in September appears to have been prompted by falling gold prices and the annual pick-up in demand ahead of the festive season. Gold prices have fallen almost 10 per cent since July due to the strengthening dollar. As gold moved close to the $1,200 per ounce level in September, investors and consumers across the globe seem to have stocked up.

Trade Deficit Widens again

The RBI has already eased some import controls by allowing seven trading houses to import the metal, driving a sharp jump in overseas buying despite a record import duty of 10 percent.

A surge rise in gold imports widened the trade deficit to an 18-month high of $14.25 billion in September, creating concerns for the government of Prime Minister Narendra Modi.

Gold is India’s second-biggest expense on imports after oil, and shipments of the metal tend to jump ahead of key festivals in October.