The World Gold Council (WGC)’s India Managing Director Somasundaram P. R. was recently quoted as saying the latter half of 2013 had seen “intense grey market” activity, but its impact would be more visible and significant in 2014 if the import curbs continue.
What the WGC India chief was saying in polite terms was that gold smuggling had gone up in the last part of 2013.
Why India’s gold market is like “That ’70s Show” – catch Part One of this article here.
Though estimates of the total amount of gold being smuggled into the country vary, market analysts, at various points in time, have put it at around 30 tons a month.
A statement by India Finance Minister P. Chidambaram in late January at the International Customs Day function that a review on the decision to lower duties was possible only after March 2014, and that monthly smuggling of gold stood between 1-3 tons after the imposition of the restrictions, had evoked snide public remarks of “gross under-estimation.”
Clearly, the Indian government is in no mood to relent.
In the interim budget presented this Monday, many had expected Chidambaram to announce some relief, but it was not to be. An interim budget became necessary since the five-year term of the present government is almost over, and elections are just a few months away. The new government is expected to present a full-fledged budget in June or July.
MetalMiner has been tracking the Indian gold smuggling story for the last six months.
The All India Gems and Jewellery Trade Federation (GJF), the national trade federation for the promotion and growth of trade in the Gems and Jewellery industry in India, has expressed “shock and deep disappointment” on the interim budget proposals, and said it “urged the government to keep import duties on gold low to eliminate smuggling; and immediately remove the 80:20 Rule while allowing consignment gold imports to ensure fair open market controlled business.”
Total jewelry demand in India in 2013 was up by 11 percent at 612.7 tons, compared to 552 tons in 2012.
Reflecting on the 2014 situation, the WGC has said the year would be “a comeback for the precious metal.” In 2014, market estimation of gold demand stands between 900-1,000 tons.