Gold wholesalers of India have started physical checks on gold stocks in order to ensure that inventories match the amount imported by banks and state-run traders.
This move could aggravate shortages in the physical market, as authorities seize gold without a valid provenance, boosting premiums. "Government agencies are raiding and seizing gold at various places and asking to reconcile the (gold bar) number with the imported gold," said India Bullion and Jewellers Association (IBJA) General Secretary, Surendra Mehta.
Imports have fallen sharply, leading to shortages and triggering smuggling. According to the World Gold Council, India imported about 750 tonnes of gold in 2013, but on the other hand, 200 tonnes have been smuggled into the country, To tackle a widening trade deficit, India has put in place measures to dissuade gold buying, including a 10 percent import tax.
The bulk of official imports are channelled through either state-owned or private foreign banks and government-backed trading companies, which in turn sell the metal to local jewellery makers.
The finance ministry and the Reserve Bank of India have acknowledged that smuggling has increased considerably but stated that they would not ease the import restrictions until they have a better grip on the trade deficit.
