At a time when the country faces a chronic goods trade deficit (crude oil, precious stones, metals, electrical and electronic equipment, edible oil, pulses, coal, fertilisers and many more items) and rapid depreciation of the rupee, resulting in import-led inflation, gold stands out as a high-performance commodity.
Bullion trade is big ticket. From a recent low of $22 Bn in 2020, the value of India’s gold import has surged. 2021 saw a 150% rebound to $55.8 Bn. After dipping to $36.6 Bn in 2022, imports zoomed again to $42.6 Bn in 2023 and then on to a new high of $58.1 Bn in 2024.
The government lists as many as 26 countries as ‘countries of consignment’ for import and a few more bunched under the ‘others’ category. Remember: for gold import, it is not ‘country of origin’ but ‘country of consignment’. Switzerland, the UAE, South Africa, Peru and Australia occupy the top five slots in terms of value, followed by the USA, Hong Kong and several African and South American nations.
Analysis of the last 10 years’ country-wise import makes for interesting reading. As per the latest available data, Switzerland tops the list of exporters with a supply worth $21.5 Bn in 2024 (previous year $16.4 Bn). The UAE follows. A surge in gold imports from the United Arab Emirates, especially after the signing of the India-UAE Comprehensive Economic Partnership Agreement (CEPA) in May 2022, is glaring. From $2.9 Bn in 2022, imports from the UAE more than doubled to $6.7 Bn in 2023 and nearly doubled again to $12.9 Bn in 2024. An expert closely associated with the bullion market rationalised this surge, saying that what used to come as an unauthorised import earlier is now coming through the official channel!
The list continues with imports from South Africa at $5.2 Bn in 2024 (previous year $4.3 Bn), from Peru at $4.4 Bn ($2.4 Bn last year), and from Australia at $3.4 Bn ($2.1 Bn last year), followed by the USA, Hong Kong, Ghana and several more.
Equally interesting is the amount of revenue India has collected each year on gold imports in the form of customs duty. From Rs 12,293 crore in 2022, the revenue for the exchequer increased to Rs 17,747 crore the following year (2023) and spurted further to Rs 26,402 crore in 2024.
Imports from Switzerland resulted in a revenue collection of Rs 7523 crore in 2024, doubling from the previous year’s Rs 3552 crore. The revenue collection from the UAE imports tripled from Rs 1,063 crore in 2022 to Rs 3,627 crore the following year and then doubled to Rs 7,486 crore in 2024.
Under the India-UAE CEPA, gold imports enjoy a concessional rate of duty. The UAE is admittedly a trading centre, but not a gold producer. The rationale for the concession that results in revenue loss for the exchequer is unclear.
Be that as it may, although the country spends tens of billions of dollars on the import of massive quantities of gold year after year (estimated at 750 to 850 tonnes), there is no audit trail of funds involved in gold trade. Many questions demand answers—import funding/source of funds; quality checks on imported goods; manner of imported gold disposal in the domestic market; local buyers and their source of money; inspection and valuation of gold export in the form of ornaments or as part of gems and jewellery; and whether round-tripping is prevalent.
In the past, from time to time, market watchers had raised concerns and cautioned about the ‘source of funds’ in the bullion trade. The suspicion of ‘tainted money’ in this market has always loomed. The bullion market needs transparency, especially about the source of funds and quality of goods, because really big money is involved.
It devolves on the Union Finance Ministry and the Reserve Bank of India to put in place a system of strict monitoring and end-to-end regulation of the bullion business.
Details of the gold smuggled and the quantum of gold seized in the last ten years are revealing. There is a year-on-year fluctuation in the number of cases and the quantum of metal seized, but a pattern is discernible.
Look at the numbers. In 2015-16, the gold seized was 2972 kg from 2815 cases, followed by 1520 kg from 1573 cases in 2016-17. In each of the following eight years, the number of cases and the quantum of gold seized varied year-on-year, but the pattern remained largely the same—roughly one kg of gold per case.
It is not hard to imagine these cases may pertain mostly to passengers returning home from abroad, trying to sneak in the yellow metal.
Yet, in the past, international agencies promoting gold have openly talked about unauthorised imports of gold into India on a large scale—running into several tens of tonnes, if not hundreds. These agencies attributed smuggling to high levels of taxation in India and indirectly pitched for a reduction in customs duty.
Their source of information about smuggling is unclear and deserves investigation. Some agencies, representing the overseas gold export cartel, work to exploit the Indian market. They pretend to be objective and neutral, but the agenda is clear.
Over the last 20 years or so, given the technological advancements, robust surveillance, and coastal area monitoring with speedboats, etc., large-scale smuggling has become an extraordinarily risky proposition or nearly impossible.
G. Chandrashekhar is senior editor, policy commentator and commodity markets specialist. Views are personal.
