In India Gold is part of culture, sign of prosperity, symbol of wealth, and is part and parcel of life. The demand for the yellow metal has made India one of the largest importer & markets of gold in the World. The net import of gold is one major factor responsible for the Current Account Deficit (CAD) which occurs when the value of goods & services imported exceeds the value of the exported goods & services. The CAD increases the foreign liabilities & depreciates the rupee against foreign currency. The Government has a hard task in preventing the widening of CAD because it indirectly involves regulating demand for the gold by the people.
To stabilize the economy and reduce the rising demand for gold, the Government uses two control measures. First is by increasing the tax and second by increasing the import duty for gold. Theoretically, both measures are effective to reduce demand and import of gold. But in reality, these policies led to the breeding of black markets, gold smuggling, and transnational organized crime. Unfortunately, India has become one of the largest gold smuggling hubs in the world.
The price of gold in India is higher compared to international markets. The transnational organized groups make use of this difference in price to smuggle gold in India without paying import duties. The object is to obtain gold at a lower price from abroad and sell it at a higher price in India and reap benefits. This form of transnational crime poses a serious threat to the economy of the nation. The ‘organized group’ for gold smuggling consists of a procurer, who obtains gold from the source country, an intermediary who acts as a channel for the gold to reach the destined country, and a local dealer who mixes the illegitimate gold with the legitimate one and makes it untraceable. The illicit gold, labeled as legitimate gold, is sold in the market and unknowingly the end consumer is purchasing “gold in conflict with law”.
The profit obtained by the criminal group strengthens their economic stability and the fund is utilized for perpetrating other forms of transnational crimes such as human trafficking, drugs & weapons trafficking, and even terrorism. Also, for smuggling gold across borders innocent people, especially youths, are trapped, recruited, or compelled into and in the event of prosecution by the law enforcement agencies, these carriers are held liable for smuggling whereas the actual perpetrators remain untouched. The alarming situation is a threat to national security. It not only weakens the economy but also harms the reputation of the legitimate gold dealers.
When it comes to the purchase of gold the concern of every customer is regarding the purity of gold which is indicated by BIS hallmark. The much-acclaimed 916 gold contains 91.6 g gold in 100g of alloy. The hallmark certificate indicates the composition or ratio of metals in the alloy and declares on the percentage of gold contained in it. The present system takes into consideration only the quantitative aspect of measuring purity. It does not take into account the “qualitative” aspect for which we must redefine the purity standards differently. The quality aspect is founded on the right of the consumer to have legitimate products. It obliges the seller to declare that the product (gold) being sold is “free from conflict”. It means the demand for legitimate gold by the customer and supply of gold free from conflict by the seller would bring a behavioral change in the society that would eventually curb the breeding of transnational gold smuggling. What we require is a system that takes into accounts both quantitative aspect & qualitative aspect in determining the purity of the gold.
The views and opinions expressed in this opinion article are those of the author(s) and do not necessarily reflect the official policy or position of The Eastern Herald.