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Context:

Kannada actor Ranya Rao was arrested at Bengaluru's Kempegowda International Airport after customs officers found 14.2 kg of gold hiding in her luggage.

India's Gold Import

India is the world's second-largest gold consumer after China, with gold imports forming about 5% of total imports.

Switzerland accounts for 40% of India's gold imports. The United Arab Emirates (UAE) contributes 16%, South Africa supplying 10%.

Laws Governing Gold Import in India

Gold import regulations fall under the Customs Act, 1962, and are administered by the Central Board of Indirect Taxes and Customs (CBIC).

The Reserve Bank of India (RBI) and the Directorate General of Foreign Trade (DGFT) issue notifications related to gold import policies, including restrictions and permitted channels.

The Baggage Rules, 2016, specify duty-free allowances and customs duties for travelers.

Duty-Free Allowances

Men residing abroad for over a year may bring up to 20 grams of gold jewelry (valued up to ₹50,000) duty-free
Women may bring up to 40 grams (valued up to ₹1 lakh) under the same conditions
Indian passengers returning from Dubai after six months' residence may import up to 1 kg of gold if customs duty is paid

Customs Duty Structure

3% duty is applied to women carrying 40–100 gm and men carrying 20–50 gm.
6% duty is applied to women carrying 100–200 gm and men carrying 50–100 gm.
10% tax: For women carrying more than 200 gm and men carrying more than 100gm.

Penalties for Smuggling

Goods may be confiscated under Section 111 of the Customs Act.
Fines up to the value of the goods under Section 112.
Imprisonment up to 7 years if the smuggled goods exceed ₹1 lakh in value (Section 135).
The Bharatiya Nyaya Sanhita, 2023, imposes minimum five-year imprisonment for trafficking illicit goods, extendable to life imprisonment.
The Unlawful Activities (Prevention) Act (UAPA) may apply if smuggling threatens India's monetary stability.

Budget 2024 reduced import duty on gold from 15% to 6% to control smuggling and balance trade. However, due to strong domestic demand and the price gap between the domestic and foreign markets, gold smuggling continues.

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Source:

INDIAN EXPRESS

PRACTICE QUESTION

Q. Consider the following statements with respect to the negative impact of increasing gold imports on the Indian economy?

It results in depreciation of the Indian Rupee
It widens the current account deficit.
It diverts household savings from more productive investments.
It fuels inflationary pressures within the economy.

Select the correct answer using the codes given below:

A) 1 and 2 only

B) 2 and 3 only

C) 1, 2 and 3 only

D) 1, 2, 3 and 4

Answer: D

Explanation:

Statements 1 and 4 are correct: If India imports higher quantities of gold, then the country is paying more foreign exchange to purchase gold, which increases demand for foreign exchange, and can lead to a devaluation of the Indian Rupee. A devaluation of the Rupee raises the price of imports, which lead to inflationary pressures within the economy.

Statement 2 is correct: Increased gold imports raises the import bill of the country, which can increase the current account deficit. Increasing the current account deficit results in the depreciation of the Rupee and lower investor confidence in the Indian economy.

Statement 3 is correct: When people invest in gold, it withdraws savings from more productive forms of investment, such as stocks, bonds, or real estate, and that reduces the economy's productivity and limits growth possibilities.

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