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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (93953)	8/28/2012 1:00:00 AM
From: TobagoJack	Read Replies (2) \| Respond to of 218645

just in in-tray From: K Sent: Tuesday, August 28, 2012 11:17 AM Subject: Fwd: India Gold Smuggling as spoken earlier a few times on this topic, the figures released by wgc and other agencies on Gold imports into India are not relevant at all....today this article shows the facts that although official Gold imports are down, Gold smuggling is up. And also please note that these are petty smugglers who smuggle 1-2 kilos in person... the bigger smuggling inwards is via organised smuggling gangs which import in bulk and are very very well organised & never caught. So it is very likely that Gold imports in India for 2012 would very likely be UP for the year and not down as (would be) reported, but unfortunately I cannot prove it (and nobody can). Likewise the import figures for China too are very very irrelevant. Kind regards =============================================================================== economictimes.indiatimes.com 28 Aug, 2012, 06.54AM IST, Deepshikha Sikarwar,ET Bureau Gold smuggling rises heavily as government's efforts to curb gold import backfire Story Comments (3) The government's efforts to curb gold imports have resulted in the collateral damage many feared - a resurgence of smuggling NEW DELHI: The government's efforts to curb gold imports have resulted in the collateral damage many feared - a resurgence of smuggling. Cases involving gold seizures at airports have risen 10-fold in recent months, confirming the worst fears of critics that the strategy to raise duties to control imports of the precious metal would spawn a revival in its smuggling. Between April and June this year, authorities impounded gold worth Rs 942 crore in some 200 cases of smuggling, up 272% on Rs 243 crore in the year-earlier period that involved 20 cases, data compiled by the finance ministry shows. During the same period, India's official gold imports fell 56% to 131 tonnes, data from the World Gold Council showed, reflecting the impact of higher duties and rising prices. "If this is what is being reported in terms of seizures by authorities, the actual quantum of smuggling must be quite high," said Biswajit Dhar, director-general of Research & Information System for Developing Countries and a trade expert. Finance ministry data suggests gold smuggling may be back and thriving after the economic liberalisation policies of the early 1990s had all but put an end to the practice, in the process denying the Mumbai underworld one of its mainstay activities and Bollywood one of its staple themes. SURGE IN ILLEGAL IMPORTS TO HURT GOVT STRATEGY A rise in the illegal gold imports will seriously undermine the government's strategy to curb gold imports to check a runaway rise in the high current account deficit that has weakened the rupee and prompted warnings from ratings agencies. A spike in illegal imports could mean the actual demand slump may not be as much as shown by the official data. "This poses a challenge to efforts to contain the current account deficit," said Deepali Bhargave, chief India economist at Espirito Santo Securities. India is the world's biggest consumer of gold and demand for the yellow metal has steadily risen over the past few years, but 2010-11 and 2011-12 saw an unusual rise as investors flocked to gold as a hedge against rising inflation. India imported $60 billion worth of gold in 2011-12, accounting for nearly 50% of the current account deficit that widened to an all-time high 4.2% of GDP, and sending alarm bells ringing. Policymakers promptly acted and raised duties on the commodity to curb imports and also harvest some of the upside for government coffers. The duty structure was first rejigged in January 2012 when the government imposed an import duty equal to 2% of value of the commodity as against the earlier specific rate of Rs 300 per 10 grams. This year's budget further increased Customs duty on standard gold bars, gold coins and non-standard gold to 10% from 5%. About 90% of the supply of gold in India is met through imports and the rest through recycling and other sources. Although import duties were not raised to prohibitively high levels, the switchover to an ad valorem tax, under which the levy is a proportion of value of product and rises and falls automatically as that value changes, ensured that consumers paid as prices rose. However, the higher levies seem to have had the unintended consequence of widening the differential between domestic and international prices, making it attractive for smugglers. "Price differential between prices in India and overseas has increased substantially...and that is leading to this increase in smuggling. The trend is more so in the border areas," said Prithviraj Kothari, president of the Bombay Bullion Association. At current exchange rates, local gold prices, which touched an all-time high of Rs 31,400 per 10 grams in Mumbai on Monday, are about Rs 1,500 per 10 grams higher than international prices, creating a situation reminiscent of the 1980s and early 90s when a huge differential in prices provided arbitrage opportunities. Gold imports into India were banned in the post-Independence era, and with the government controlling domestic production, the differential between domestic and international prices rose at times to high double digits, giving a fillip to smuggling. The government did away with restrictions on gold imports in the early 1990s as part of its liberalisation programme, which narrowed the price differential and effectively killed smuggling. As smuggling rears its head again, Customs officials and the Directorate of Revenue Intelligence are keeping a close watch on gold entering the country. Policymakers are also attempting to make financial instruments such as mutual funds more attractive for investors to wean them away from using gold as an investment tool.