Vijay Valecha, Special to The National May 10, 2022
In April, a man took off on a flight from Abu Dhabi with such a thing as too much gold on him. At Delhi's Indira Gandhi International Airport, customs officials seized the portion of his precious metal cargo that the man was carrying under his wig – melted and taped to his head.
He had more on him, totalling 630 grams, though authorities, thankfully, declined to say where else he was hiding it. Nor was this the first case this year of travellers to India having devised extraordinary means to heave excessive, forbidden quantities of gold into the country. The list of failed, albeit resourceful, attempts to skip having to pay customs duties is long, and predictable. It tends to fluctuate far less than the price of gold on any given day.
Others have tried to push gold into the country in mobile phones, in speakers, in Tang juice containers and in the handles of fruit juicers. In the spirit of the pandemic, one even tucked it into the exhalation valve of an N-95 mask. Last month, in a big win for Indian law enforcement, a man was caught with gold bars jammed in to his pocket, having adorned himself with a hefty gold chain, presumably as a poorly thought-out distraction. All the gold together on him was worth more than $74,000 – on top of that, he had $38,000 in cash.
Part of the problem is that the demand for gold is unusually high in India. In fact, it is the highest in the world – slightly higher than in China and nearly four times higher than the third-ranked country, the US. That's because gold has a clear cultural and religious importance for many Indians. Rare is the compatriot in the UAE who has not, at least once, even if just for the sake of observing the overwhelmingly yellow-tones, headed to the Gold Souk in Dubai, or not bought the token coin or trinket. It is an incredibly popular asset among all sections of society, for investments, as an inheritance for children, as a gift for weddings in the family, or as a marker for occasions in life or for festivals, such as Diwali. Weddings are the big ticket; they generate approximately 50 per cent of annual gold demand in India, according to the World Gold Council.
Of course, the vast majority of Indian travellers to and from the UAE do abide by the law and stick to safe, legal routes of buying gold. But while the flood of demand creates revenue opportunities for the government in the form of customs duties, the sheer volume makes the likelihood of people wanting to skirt the import rules much greater. Finding the right level of taxation is tricky.
Since February of last year, the Indian government cut the tax on imported gold from 12.5 per cent to 10.75 per cent of its value. That cut, however, has not been enough to deter law-breakers. In the case of the man with the wig, it is interesting to consider how many times over the limit he was – India permits its citizens to carry 20 grams of gold for men (worth $654 or Rs50,000) and 40 grams for women, duty-free.
Gold jewellery also constitutes a big portion of the bilateral trade between the UAE and India. Last week's Eid celebrations happened to coincide with the Indian spring festival "Akshaya Tritiya", a big auspicious day for jewellers and when some well-to-do Indians buy more gold or start their business ventures. During that time the UAE received its first duty-free imports from India, containing gold and jewellery valued at $1 million.
Given the value of the gold trade for India, smuggling can pose a major problem in the form of lost revenue and using up law-enforcement resources. In the past 11 years, more than 2,500 cases of smuggling have been registered by Delhi Customs, which has seized three tonnes of gold. Other Indian cities, whether Mumbai, Kochi or Chennai, have their own figures. According to The Hindu, an Indian newspaper, about 200 kilograms of gold are seized every year at the Kozhikode airport, in the southern state of Kerala. And in 2019, the WGS said, up to 120 tonnes of gold was smuggled into the country.
Even if customs duties are lowered, however, gold's deeply intimate connection with India's large informal economy will be difficult to cut, meaning that much of it will continue to circulate off the radar to fund off-the-books purchases. Just one example can be found among India's middle-class families, for whom accumulating large amounts of gold over time often depends on procuring it through "family jewellers", long-standing businesses known to mothers and grandmothers and which offer them jewellery at a special rate. Personal relationships with jewellers often go back generations, and to ensure good prices deals are often done under the table, without receipts or tax invoices.
The role of gold in the informal economy is, however, also a double-edged sword. While the tradition of "family jewellers" establishes trust for price negotiations, the fact that transactions are unregulated diminishes, in the bigger picture, trust in the quality of the product. There is a popular belief in pockets of India that foreign gold is purer than that found in the local market. As a result, some people tend to smuggle gold in from outside.Source: