Indian authorities are fighting an explosion in gold smuggling as higher import tariffs and rising demand have created shortages ahead of the traditional Hindu wedding season, when gold consumption in India traditionally reaches its highest point every year.
Growing demand for gold has put India -- the world’s largest importer of the precious metal -- in a bind. Economists believe Indians’ obsession with the haven asset has stifled economic growth in the country, according to the Financial Times.
The solution: Convince citizens to stop buying so much gold and instead invest their capital elsewhere. “If I have one wish which the people of India can fulfill, it is don’t buy gold,” Indian Finance Minister P. Chidambaram said in June.
Imports have continued to rise, pushing the country’s current account gap to record levels and leaving it vulnerable to capital flight.
But in August, the tariff increases caused the gold import market in India to collapse, creating severe shortages of gold in the legitimate market. So smugglers swiftly stepped in to fill the void.
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“It comes from Dubai, from Singapore, from Bangladesh," Bhaskar Bhat, managing director of Indian jeweller Titan, told the Financial Times.
But convincing the public won't be easy. Gold’s role as a symbol of social status is deeply ingrained in Indian society.
“In our community [the families of betrothed men] will definitely ask you for gold...otherwise they won’t marry,” a domestic worker from Kerala told the Financial Times, adding she was still paying her son-in-law's family.