An article from the Global Initiative Against Transnational Crime on 20 August says that gold is today no longer negatively associated with crooked businessmen, but rather positively with the consumerist aspirations of middle-class India. It is used to project enhanced family status at events such as the ‘great Indian wedding’, and is perceived as a high-return investment and a hedge against inflation. Demand for gold has consistently risen 14% annually since 2001, with prices altogether increasing 8-fold. A report from the organisation examines 3 questions –
- Why did an illicit economy around gold imports emerge in India?
- What are the methods and routes used by smugglers?
- Why has the illicit economy proved resilient to countermeasures by the government?
The report says that the persistence of gold smuggling to India is connected with 4 factors –
- cultural preferences for an asset that can lie beyond easy reach of the taxman;
- a lack of equally lucrative investment alternatives;
- an abundance of ‘black money’ generated by the informal (i.e. unorganised) sector; and finally
- high import taxes aimed at raising government revenue and reducing private purchases of gold.
Yet, dependent as they are on gold as a guarantee of personal wealth and/or business success, both impoverished and wealthy sections of Indian society defy government strictures on its import. Thus, smuggling networks thrive as a result of perennially high private demand.