you and i both knew little to nothing re the indian gold tariff and fractional reserve gold banking.
thankfully i can find out more by pinging my indian friend who is a professional gold trader based in singapore. i share my findings below
it helps us to fade wsj, nyt, forbes, economist, ... and people who can only read such w/o understanding and be wildly out of calibration w/ the truth.
we must firstly pity those who can simply read and believe they know the truth, and then it is our duty to take the other side of their trade so that what was theirs become ours, from weak to strong hands, that cicilization can continue minus the less thoughtful
in any case, just in in-tray, and we have the slight but critical advantage that when we read or hear the truth, we know it to be such. such be our blessing.
From: C
Sent: Tuesday, January 22, 2013 1:55 PM
Subject: Re: India Raises Import Tax to Cut Deficit & To Allow Fractional Reserve Banking of Gold
Gold smuggling was the biggest revenue earner for these corrupt pols from
mid 1970's to late 1990's, a period where wgc would say India hardly imported any Gold !!
On 22 Jan, 2013, at 11:34 AM, W wrote:
Largest smuggling rings likely owned by the politicians. Expect the duties to increase over time.
From: C
Sent: Tuesday, January 22, 2013 11:21 AM
Subject: Re: India Raises Import Tax to Cut Deficit & To Allow Fractional Reserve Banking of Gold
Dear all,
attached below is an article which I had sent to our group a few months ago,
an article which was writtern after the 1st import duty hike sometime last year.
this article shows the facts that although official Gold imports are down, Gold smuggling is up. And also be 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 who are not caught ever as they have political patronage!! =============================================================================== 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
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.
On 22 Jan, 2013, at 11:00 AM, G wrote:
Or just encourage more smuggling.
As starts to become lucrative at 6% spread
Should make for a nice trade along india's many borders
Of china happy to take whatever india does not
And even happier to convert their red pieces of paper for shiny metal ! Especially as govt knows it is very easy to make more of the red paper. Much harder to make the gold :)
----- Original Message -----
From: J
Sent: Tue Jan 22 10:56:51 2013
Subject: Re: India Raises Import Tax to Cut Deficit & To Allow Fractional Reserve Banking of Gold
some kind of wonderful
making more gold available in india from indian inventory, waking up hibernating saving
making it less expensive for savers to gather more savings
a win win |
