<p>The recent seizure of 14.6 kg of gold bars at the Kempe Gowda International Airport from a Sandalwood actor once again highlights the enduring allure of gold. </p>.<p>The gold bars, valued at about Rs 12.56 crore, were reportedly concealed in a belt strapped to the actor’s body. Follow-up action led to the recovery of Rs 2.67 crore in cash and gold jewellery worth Rs 2.06 crore. Between the Directorate of Revenue Intelligence (DRI) and various other enforcement agencies, gold seizures occur almost daily, suggesting an insatiable demand for the yellow metal.</p>.<p>India has always had a deep-rooted obsession with gold. In the past, to conserve foreign exchange reserves, gold imports were heavily restricted, leading to unbridled smuggling—a period synonymous with figures like Haji Mastan and a young Dawood Ibrahim. Liberalisation eased restrictions, allowing gold imports on payment of duty, which dramatically reduced smuggling. Over time, basic customs duty was gradually lowered, reaching 6 per cent in the 2024 Budget for passengers of Indian origin returning after a stay abroad of more than six months (for shorter stays, the duty remains at 36 per cent). While this marks a significant progress, smuggling persists—via land, sea, and air, with gold concealed in body orifices, belts, vehicles, machine parts, molten metal, or even paste. The ingenuity of smugglers is matched only by the vigilance of customs officers.</p>.<p>At its core, smuggling thrives on demand and supply restrictions imposed by tariff barriers. And, of course, there is profit to be made in smuggling. As of March 5, 10 grams of 24-carat gold in Dubai—the major source of gold for both smugglers and genuine duty-paying passengers—was Rs 82,640, while the same quantity of gold in Bengaluru was Rs 85,890. Smugglers, especially those making short trips, face a duty of 36 per cent, but even after factoring in additional costs, the profits remain substantial. Hence, the attraction to smuggling—and taking the attendant risks.</p>.<p>The demand for smuggled gold never seems to abate. This despite the fact there is no real shortage of gold within the country. Licit imports of gold in 2024 were in the range of about 712 tonnes. As of November 2024, the Reserve Bank of India (RBI) held 876.2 tonnes of gold reserves. Our foreign exchange reserves at the end of 2024 were at $704.89 billion. As per the Finance Minister’s union budget speech 2015-16, approximately 20,000 tonnes of gold were said to be available domestically. A 2018 Niti Aayog report has, however, estimated that 23,000-24,000 tonnes of gold are lying unused in the vaults of banks, with households, and religious institutions throughout the country.</p>.<p>Several policy measures were put in place in the hope of bringing this unused gold into the open. There is the Gold Monetisation Scheme (GMS), the Sovereign Gold Bond scheme, and the India Gold Coin. These are in addition to the gold ETF that mutual funds offer. There is also the Hallmarking scheme, where the Bureau of Indian Standards (BIS) Act was amended to provide for the hallmarking sale of gold jewellery. The fond hope behind all these initiatives was that citizens would bring out the gold lying dormant to take advantage of these schemes; that this would meet domestic demand—implicit also was the belief that smuggling would consequently come down. As the latest case indicates, this has not happened. But India must continue with these schemes and perhaps popularise them more.</p>.<p>Smuggling has a multiplier bad impact on the economy. Apart from the loss of legitimate jobs, there is an obvious loss of customs revenue to the government. Smuggled gold, when sold in the market, generates money that is outside the tax net—‘black’ money. Some portion of the proceeds are transmitted back to the controller of the smuggling operations through illicit channels—‘hawala’ or by resorting to trade-based money laundering. The rest remain in the country and finance other criminal activities.</p>.<p>While policy initiatives and enforcement vigilance should continue, policymakers must not forget that in India the lure of gold is cultural. We would need to generate awareness, especially among the younger generation, that at its core gold is nothing but a shiny metal invariably only adorning bank vaults. The value of a country’s currency is no longer linked to the gold reserves it holds; it is high time we appreciated that the value of individuals also need not be. And there are better ways to hedge against economic uncertainties. </p>.<p><em>(The writer is a retired chairman of the Central Board of Indirect Taxes & Customs)</em></p>
<p>The recent seizure of 14.6 kg of gold bars at the Kempe Gowda International Airport from a Sandalwood actor once again highlights the enduring allure of gold. </p>.<p>The gold bars, valued at about Rs 12.56 crore, were reportedly concealed in a belt strapped to the actor’s body. Follow-up action led to the recovery of Rs 2.67 crore in cash and gold jewellery worth Rs 2.06 crore. Between the Directorate of Revenue Intelligence (DRI) and various other enforcement agencies, gold seizures occur almost daily, suggesting an insatiable demand for the yellow metal.</p>.<p>India has always had a deep-rooted obsession with gold. In the past, to conserve foreign exchange reserves, gold imports were heavily restricted, leading to unbridled smuggling—a period synonymous with figures like Haji Mastan and a young Dawood Ibrahim. Liberalisation eased restrictions, allowing gold imports on payment of duty, which dramatically reduced smuggling. Over time, basic customs duty was gradually lowered, reaching 6 per cent in the 2024 Budget for passengers of Indian origin returning after a stay abroad of more than six months (for shorter stays, the duty remains at 36 per cent). While this marks a significant progress, smuggling persists—via land, sea, and air, with gold concealed in body orifices, belts, vehicles, machine parts, molten metal, or even paste. The ingenuity of smugglers is matched only by the vigilance of customs officers.</p>.<p>At its core, smuggling thrives on demand and supply restrictions imposed by tariff barriers. And, of course, there is profit to be made in smuggling. As of March 5, 10 grams of 24-carat gold in Dubai—the major source of gold for both smugglers and genuine duty-paying passengers—was Rs 82,640, while the same quantity of gold in Bengaluru was Rs 85,890. Smugglers, especially those making short trips, face a duty of 36 per cent, but even after factoring in additional costs, the profits remain substantial. Hence, the attraction to smuggling—and taking the attendant risks.</p>.<p>The demand for smuggled gold never seems to abate. This despite the fact there is no real shortage of gold within the country. Licit imports of gold in 2024 were in the range of about 712 tonnes. As of November 2024, the Reserve Bank of India (RBI) held 876.2 tonnes of gold reserves. Our foreign exchange reserves at the end of 2024 were at $704.89 billion. As per the Finance Minister’s union budget speech 2015-16, approximately 20,000 tonnes of gold were said to be available domestically. A 2018 Niti Aayog report has, however, estimated that 23,000-24,000 tonnes of gold are lying unused in the vaults of banks, with households, and religious institutions throughout the country.</p>.<p>Several policy measures were put in place in the hope of bringing this unused gold into the open. There is the Gold Monetisation Scheme (GMS), the Sovereign Gold Bond scheme, and the India Gold Coin. These are in addition to the gold ETF that mutual funds offer. There is also the Hallmarking scheme, where the Bureau of Indian Standards (BIS) Act was amended to provide for the hallmarking sale of gold jewellery. The fond hope behind all these initiatives was that citizens would bring out the gold lying dormant to take advantage of these schemes; that this would meet domestic demand—implicit also was the belief that smuggling would consequently come down. As the latest case indicates, this has not happened. But India must continue with these schemes and perhaps popularise them more.</p>.<p>Smuggling has a multiplier bad impact on the economy. Apart from the loss of legitimate jobs, there is an obvious loss of customs revenue to the government. Smuggled gold, when sold in the market, generates money that is outside the tax net—‘black’ money. Some portion of the proceeds are transmitted back to the controller of the smuggling operations through illicit channels—‘hawala’ or by resorting to trade-based money laundering. The rest remain in the country and finance other criminal activities.</p>.<p>While policy initiatives and enforcement vigilance should continue, policymakers must not forget that in India the lure of gold is cultural. We would need to generate awareness, especially among the younger generation, that at its core gold is nothing but a shiny metal invariably only adorning bank vaults. The value of a country’s currency is no longer linked to the gold reserves it holds; it is high time we appreciated that the value of individuals also need not be. And there are better ways to hedge against economic uncertainties. </p>.<p><em>(The writer is a retired chairman of the Central Board of Indirect Taxes & Customs)</em></p>
