Gold Smuggling in India Skyrockets Amid Rising Prices Ahead of Festivals
Gold smuggling in India has surged significantly as the country approaches its major festival season. Both government and industry officials have noted an alarming increase in illicit activities, driven by record-high gold prices and a constrained supply chain.
Increase in Gold Smuggling Ahead of Festivals
Despite an initial decline in smuggling following a reduction in import taxes from 15% to 6% last year, recent weeks have seen a resurgence in gold smuggling attempts across various Indian airports. Customs and Directorate of Revenue Intelligence (DRI) officials reported multiple foiled attempts to illegally bring gold into the country.
Demand Fuels Smuggling Activities
The upcoming Dhanteras and Diwali festivals, during which buying gold is culturally significant, are fuelling heightened demand. Bullion dealers indicate that smugglers have become more efficient, liquidating their goods within hours due to the compressed supply amid rising costs.
- Record gold price: 128,395 rupees per 10 grams as of October 2023.
- 67% increase in gold prices this year.
- Potential profit for smugglers exceeding 1.15 million rupees per kilogram by avoiding tariffs.
A senior bullion dealer in Mumbai commented on the increased profitability for smugglers as gold prices rise. He noted that margins for smugglers had previously decreased to 630,000 rupees per kilogram after the tax cut. However, with prices escalating again, the illegal trade has become increasingly tempting.
Market Conditions and Premiums
Supply shortages have also led banks to raise premiums on gold, making them unable to meet the elevated demand. Reports indicate Indian dealers are now quoting premiums as high as $25 per ounce above official domestic prices, marking the highest premiums seen in over ten years.
Smuggling Statistics
Government data from the fiscal year 2024/25 indicates that law enforcement agencies encountered significant gold smuggling, documenting 3,005 cases and seizing 2.6 metric tons of gold. This surge reflects the ongoing challenges in regulating gold imports amidst rising consumer demand and further complex trade dynamics.
The confluence of high prices, strong festival demand, and restrictive supply are likely to continue shaping the landscape of gold smuggling in India. As the festive season progresses, both authorities and market analysts will be scrutinizing trends closely.
