A great deal of news coverage has focused on the legislative war that the Indian government has engaged in against its domestic gold market, especially over the past two years.
The unpopular effort seems to finally be having a noticeable impact, however, according to the latest data on gold smuggling from India’s Ministry of Finance.
Gold Smugglers Beware
The myriad ways in which the administration of Indian Prime Minister Narendra Modi has sought to limit the amount of gold pouring into the country have been well-documented. Between eliminating high-denomination banknotes to steep import duties on gold bullion (among many other measures), Modi’s government has been aggressive in its attempts to curb gold ownership.
Naturally, this has had the unintended effect of encouraging a thriving industry around smuggling gold into the country. One of the noteworthy changes the Finance Ministry has seen in the past two or three years is the steady rise in gold seizures by the government. As a matter of fact, the amount of seized gold entering India has astronomically climbed over the past five years, from under 10 kilos in 2011 to 46 kg (2012), to 99 kg (2013), followed by 692 kg in 2014 and a staggering 1,119 kg last year.
Shifting Entry Point
Coinciding with this rise in the seizure of illegal gold imports has been the necessary relocation of which nearby country smugglers are using to reach India by proxy. During the past three years, the most common source of gold smuggled into India has been the United Arab Emirates (UAE). This is unsurprising considering the Emirates is a popular gold hub in the region. Presumably, gold would be quite legally traded in the UAE and then funneled into India.
However, as customs agents have become more vigilant and gold seizures have gone up, the origin point for gold entering India has had to shift. Thailand was a key source in the 2014-2015 fiscal year, with nearly 1,115 kilos of gold bullion originating from the Southeast Asian country. (This ranked second during the year behind the UAE, which also took the top spot last year at over 1,417 kg.)
Bangladesh, Singapore, and Sri Lanka are also popular places for smugglers to use as a starting point for making it into India with their gold. The more that the authorities have caught onto the Thai and Emirati channels, the more the black market has found alternative entry points. So far in the second half of 2016, the neighboring Myanmar (formerly Burma) has actually been the #1 source for smuggled gold into India.
While the amount of seized gold has skyrocketed, gold smuggling and overall gold imports are down considerably this year, as the Indian government surely hoped.
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