India Gold Industry Calls Nationwide Strike As Gov’t Conducts Raids

March 4th, 2014 by

gold-bazaarIndustry associations representing Indian bullion dealers and jewelry companies have called for a nationwide one-day strike for March 10, to protest government agents seizing gold stocks during physical inspections of warehouses.

“Government agencies are raiding and seizing gold at various places and asking to reconcile the (gold bar) number with the imported gold,” said India Bullion and Jewellers Association (IBJA) general secretary Surendra Mehta.

India has raised import tariffs on gold three times within a year, and imposed draconian import restrictions that require 20% of every allotted gold shipment to be made into jewelry and exported before businesses can get any more gold. This has led to an explosion in gold smuggling, and burgeoning organized crime syndicates. Conservative estimates are that 200 metric tonnes of gold was successfully smuggled into India in 2013, and that the government has lost $1 billion in tax revenue during the same time. Despite widespread smuggling, the gold shortage means that prices in India are $80 more than the London spot price.

chidambaram

Indian Finance Minister P. Chidambaram

The drastic import restrictions were in response to a widening current account deficit that was strangling the Indian economy. India has traditionally been the world’s largest consumer of gold, and importation of the yellow metal was second only to oil as a reason for the trade deficit.  Finance Minister P. Chidambaram has faced growing calls to ease gold restrictions, especially as elections near. His Congress Party is falling in the polls, and gold restrictions are one reason.

Jewelers and bullion dealers complain that the import laws are unclear. Retailers are complaining that Customs agents are physically auditing their gold stocks and seizing bars that were legally purchased from middlemen. Prithviraj Kothari, owner of a major jewelry store, told Reuters that his shipment of 125 kg (4,400 oz) of gold had been detained at Ahmedabad airport for a month. He can’t order any more due to the restrictions, so he has no raw gold to make jewelery with.