ALUVA: The recent seizure of gold worth `2 crore at the Cochin International Airport Ltd (CIAL), followed by several such attempts to smuggle gold in the past week alone, could be the outcome of the government’s initiatives to clampdown on the black money stashed abroad, say experts.
According to them, black money holders might be converting cash into the yellow metal as they could benefit significantly by doing so, given the current economic and political scenario.
RBI chair-professor and IIM-B faculty member Charan Singh said that those who are keeping black money in overseas accounts could be converting the cash into gold, and transporting it back to India.
“Now, the overseas account holders might be scared after the government started the crackdown on funds parked in overseas banks,” he said.
India imports gold mainly from Switzerland. The demand for gold is very high owing to Diwali and the marriage season, among other factors.
“At present, the world economy is wobbling due to geopolitical uncertainties, as well as several other factors. In such situations, gold is seen as a safe investment, for its ability to provide good return. A very good example of the the economic imbalance is the declining trend in oil prices during the winter, when actually the demand should have been the highest,” said Charan Singh.
As far as the smugglers are concerned, they find it safe as the fall in the global prices of gold has not reflected in the Indian market.
“Currently, the Indian market is not showing a fall in gold prices that is proportionate to the decline in international prices. The rupee’s depreciation is the main reason for that,” said Geojit Com Trade whole-term director C P Krishnan.
“The holders of black money could not have legally imported gold as the law stipulates that only a person who had been in a foreign country for more than 6 months could import gold into India, and that also a maximum of 1 kg. Once the person brings that much gold, he will have to wait for another 6 months before bringing more,” said Customs officials.
Given the Central Government’s decision to crackdown on illegal bank accounts of Indians abroad, smuggling of gold is the best alternative. It can also be assumed that some gold has already found its way to the country through the illegal route, given the fact that some of the overseas accounts were almost empty by the time the authorities traced them. According to Charan Singh, one way to curb the growing incidents of gold smuggling is to reduce the import duty on it.
“The import duty should be reduced, not to the very low levels that existed a year ago, but to a balanced level that would allow people to liquidate the gold that is sitting idle at their homes,” he said.