Smuggling of Gold

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    • Over 63% of this smuggled gold was detected at airports.
    • Recently, the Department of Revenue Intelligence seizes 101.7 kg smuggled gold worth ?51 crore in Golden Dawn Operation across India
    • Though India witnesses legal import of around 800-1,000 tonnes of gold annually, the size of the grey market is estimated to be around 4,000 tonnes annually. 
    • According to the data available with the Union Finance Ministry, Tamil Nadu, Maharashtra, and Kerala accounted for the bulk of the gold smuggling cases registered in the country in the past 10 years.

    How much Gold India imports?

    • In fiscal year 2022, India was estimated to import more than 3.4 trillion Indian rupees worth of gold.
    • India, fulfills more than 90% of its demand through imports. In 2021, India ranked as the second largest gold importing country worldwide based on value.
    • According to a recent World Gold Council report, India was the largest consumer of gold before being overtaken by China in 2009. In 2021 India bought 611t of gold jewellery, second only to China (673t) but comfortably ahead of all other gold-consuming markets.

     

    What is Smuggling?

    • Smuggling is the illegal transporting of goods. These goods can be legal, such as alcohol and tobacco, or illegal, such as drugs and arms. Illegal trafficking of immigrants is also a form of smuggling.
    • Smuggling is a multidimensional issue that has a detrimental impact on the economy and national security. It can further destabilise countries by instigating crime, funding terrorism, and generating and circulating black money globally.

    What are the problems associated with Smuggling? 

    • Loss of Revenue: Smuggling is an act of tax evasion which deprives the government of revenue for public expenditure.
    • Distortion of Market Prices: Goods which are smuggled into the country are often sold a lot cheaper than goods brought into market through the right procedures. Smuggling therefore deprives traders of free competition by creating undue competition with those who have paid taxes. 
    • Rise in Unemployment: When there is unfair competition in the market, compounded by the collapsing of industries, the labour market (employment base) is eroded. Manyprofessionals, skilled and unskilled personnel remain jobless.
    • Health Concerns: Most smuggled goods like drugs are substandard and are harmful to the lives of those who consume them. It could expose the consumers to various diseases.
    • Against National Security: Smuggling can cause insecurity especially when restricted goods like guns are smuggled. Such goods end up in the hands of a few people who can use them to destabilize the security of the citizens of the country.
      • This illicit trade can contribute to a rise in organized crime.
    • Funding Terrorism: This could be a source of funding for terrorist organizations.
    • Threat to Atmanirbhar Bharat: A growing threat to Atmanirbhar Bharat today is the deadly combination of smuggling and massive amounts of misdeclaration that leverage existing treaties and Free Trade Agreements. 

     

    Way Ahead

    • Public policy and strong enforcement are needed to address counterfeiting and smuggling. 
    • There is a need for law enforcement and tax authorities to up their game with better cross-border coordination and trade-data reconciliations, apart from in-country crackdown on grey markets.
    • There is a need to declare an Anti-Smuggling Day and work with other countries to make this a global effort.
    • There is a need to rely on analytics and artificial intelligence to track and trace consignments, patterns, and modules to prevent smuggling.

    Related Key Facts

    • The gems and jewellery sector in India is one of the largest in the world and contributes to about 29 per cent of global consumption. India is one of the largest exporters of gems and jewellery.
      • UAE, the US, Russia, Singapore, Hong Kong, Latin America, and China are the biggest importers of Indian jewellery.
    • Gold was used as the world reserve currency up through most of the 20th century. The United States used the gold standard until 1971.
    • India’s gold imports contribute to the second largest part of the import bill after oil.

    Directorate of Revenue Intelligence (DRI)

    • It was constituted in 1957 as the apex anti-smuggling intelligence and investigation agency functioning under the Central Board of Indirect Taxes and Customs (CBIC) to counter the menace of smuggling in India. 
    • DRI works to secure India’s national and economic security by preventing the outright smuggling of firearms, gold, narcotics, fake Indian Currency notes, antiques, wildlife and environmental products.
    • DRI enforces the provisions of the Customs Act, 1962 and over fifty other allied Acts including the Arms Act, NDPS Act, COFEPOSA (Conservation of Foreign Exchange and Prevention of Smuggling Activities), Wildlife Act, Antiquities Act, etc. 
    • It is headquartered in New Delhi.
    • It maintains contact with the CBI and INTERPOL.

    Know about World Gold Council (WGC)

    • It is a nonprofit association of the world’s leading gold producers.
    • The WGC covers the markets which comprise about three-quarters of the world’s annual gold consumption.
    • Headquartered in London,  they have offices in India, China, Singapore, Japan and the United States.
    • It is a market development organization for the gold industry which includes 25
    • members and many gold mining companies as well.
    • The WGC was established to promote the use of and demand for gold through
    • marketing, research and lobbying.

    Source: THSyllabus: GS3/ Indian Economy & related issues, Security Challenges & their Management in Border Areas

    In News

    • Recently, there is a surge in gold smuggling amidst the soaring prices of gold over the past year.

    How much Gold is Smuggled into India?

    • According to the Department of Revenue Intelligence and customs, nearly 4,000 kg of smuggled gold was found in the first 11 months of 2022-23, the highest in four years.