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India’s black money returning as gold
Non-resident Indians in Canada and around the world, who constantly carry gold back to their homeland, are likely agents for money laundering, say jewelers in India.
The Indian jewelers hosted a party for members of parliament last week in Delhi to press for their demand for a drastic cut in quantum of custom-free import of gold by NRIs.
Currently, an NRI or Non-resident Indian, after six months of stay overseas, can return with 10 kgs of gold or 100 kgs of silver. Indian jewellers want this reduced to 1 kg of gold.
Bloomberg data suggested that the yellow metal could be trading internationally around $1,900 an ounce by the end of the year.
Indian jewelers have asked the government to tackle the NRI quotas instead of increasing gold taxes on them.
The issue of a cut in the NRI gold import quota came after Indian MPs expressed concern over gold becoming a means of stashing unaccounted wealth and money laundering, saying that covering the trade under excise laws could prevent the practice.
The jewellers turned the blame on NRI travellers saying their gold import had emerged as major money laundering tool.
Nitin Khandelwal, a director of the All India Gems and Jewellery Association (AIGJF) said that gold purchased by NRIs does not reach the jewellers who normally import the commodity through banking channels. This begs the question as to where the gold finally lands up, he added.
Acccording to Ashok Minawala, the former president of AIGF the prices were much lower when the relaxation on imports by NRIs was introduced.
"However, today 10 kgs gold costs almost C$550,000. An ordinary NRI does not have capacity to purchase it. This raises suspicion over those bringing gold," he said. Minawala said the government, should cut the quota to around 1 kg.
The US-based group Global Financial Integrity estimates that India has lost more than $465bn in illegal capital flight since the country gained independence in 1947.
Almost three-quarters of the illegal money that comprises India's black market economy ends up outside the country, the group said in a report last year.
India's underground economy has been estimated to account for 50% of gross domestic product (GDP).
The government says it is taking measures to bring back the illegal money but that there are difficulties in revealing information because of confidentiality treaties between countries.
Estimates vary but the black (cash) economy constitutes roughly a third of India's nominal GDP of $1.78 trillion. That amounts to $600 billion.
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