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Gold duty hike in India sees higher imports in Pakistan, Bangladesh, Myanmar, Nepal and Sri Lanka.


Date: 14-12-2013
Subject: Gold duty hike in India sees higher imports in Pakistan, Bangladesh, Myanmar, Nepal and Sri Lanka
NEW DELHI: India's appetite for gold has set the alarm bells ringing in countries in its immediate neighbourhood that have seen a surge in imports of the metal after the dominant regional power clamped down heavily on them by raising duties and imposing quantitative restrictions in a successful bid to rein in its galloping current account deficit.

The intelligence agencies of Pakistan, Bangladesh, Myanmar, Nepal and Sri Lanka have alerted India that gold imported through them could be finding its way into the country through porous borders. All these countries, which have lower customs duties than the 10% imposed by India, have seen a surge in gold imports, which in turn has put pressure on their current account deficits. The arbitrage opportunity makes it worth the risk of being caught smuggling gold into India.

"Gold smuggling is a concern," said Najeeb Shah, director-general, Directorate of Revenue Intelligence. "There has been a sharp increase in gold imports in some of the neighbouring countries... We are working very closely with local intelligence agencies and customs counterparts."

Indian authorities are right to be concerned, given the data, which show the import restrictions have worked, all too well. Gold and silver imports dropped to $25.5 billion in the first eight months of the fiscal from $33.5 billion in the year-earlier period.

Gold and silver worth $33.5 billion were imported in the year-ago period. But, while economic growth is yet to show any marked signs of revival, wedding demand hasn't shown any signs of waning to that extent.

India raised the import duty on gold jewellery in phases to as much as 15% and standard gold to 10% to discourage the high consumption that bloated its current account deficit to a record 4.8% of gross domestic product last fiscal. India imported 845 tonnes of gold in 2012-13.

With the scaling back of imports and other factors, the current account deficit is expected to decline to about 3% of GDP this year. That some of the gold trade has shifted to unofficial channels is evident from the increase in the number of seizures of smuggled gold. As of October, there were some 664 cases involving gold worth Rs 208.23 crore, up from almost nothing before the restrictions were put in place.

Across the border in Pakistan, gold imports surged almost 10-fold in the July-August period, prompting a worried government there to ban foreign purchases of the metal for a month. As per available data, Pakistan imported 3,265 kg of gold worth $136.618 million in the two months, up from 347 kg worth $18.78 million in the year-earlier period. Sri Lanka's gold imports rose to $100 million in the first four months of the year from about $150 million in the whole of 2012, prompting the government t ..

A few of India's neighbours have informally raised the issue of high customs duties in India leading to surging imports of gold into their country, said another government official.

Smugglers use land, air and sea routes to bring the gold in, enlisting a variety of couriers who use a range of methods to conceal the metal.

The Directorate of Revenue Intelligence has stepped up information sharing and coordination with its counterparts in these countries to catch not just gold smuggling but also the movement of fake currency and narcotics.

Source : economictimes.indiatimes.com

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