Illegal gold imports in India reached their peak since 2023 in the third quarter, as increased government duties prompted the use of unofficial channels, according to a report by the World Gold Council.
Informal supplies for the period from July to September increased by over 1500%, reaching 50 metric tons compared to 3 tons the previous year, reported the working group citing data from the consulting firm Metals Focus. The report did not specify how this trade is tracked.
Such imports are usually carried out through routes that allow evasion of official duties, such as smuggling or importing small batches by private individuals. The World Gold Council added that past tax increases have contributed to an 'increased incentive' for inflows through such channels.
In the world's second-largest consumer market for informal gold, there has been a boom since the government more than doubled import duties on gold and silver to 15% earlier this year. This move was made as part of measures to curb purchases, as India battles a growing trade deficit caused by rising energy prices.
Indians acquire precious metal for celebrating births, religious festivals, and, most importantly, weddings. It can be used as jewelry, a gift, or a contribution to family savings. Since domestic production is low, most demand is met through imports, which puts significant pressure on the trade balance and currency.
The decision to raise taxes also encouraged more Indian households to resort to off-the-books cash sales, where bullion and jewelry are exchanged without invoices that authorities could track.
Demand for gold in the country, covering jewelry and investments, grew compared to the previous quarter, although most indicators point to a decrease compared to the previous year. According to the report, consumption usually rises in the last quarter, which should be supported by major festivals like Diwali.
Nevertheless, there are signs that the expected growth may not materialize. The country's largest precious metals producer is currently holding back, betting that the recent price decline may continue. Gold fell by 6.8% in October and dropped below the key level of $4000 per ounce, trading below that mark since then.
