Somasundaram PR, the managing director (India) at the WGC, told FE that gold smuggling could hit as much as 200 tonne this calendar year compared with around 150-200 tonne a year ago. WGC had estimated Indian demand to be in the range of 850-950 tonne for 2014, down from 975 tonne a year ago. This means a significant chunk of gold will be pumped into the country through illegal channels.
He said the grey market has been pretty much active ever since the authorities started imposing restrictions in the form of a 10% import duty and the 80:20 rule by RBI, which mandates at least one-fifth of imported gold must be reserved for re-exports.
Bullion industry executives at an Assocham event, on Thursday, said gold seizures by official agencies are just negligible and don't adequately reflect actual supplies through illegal channels.
According to the finance ministry data, official agencies seized 1,295.87 kg gold in the first three months of the current fiscal, compared with 2,344.85 kg seized in 2013-14. In value term, the seizures in the June quarter hit Rs 354.07 crore against Rs 680.20 crore in FY14. Interestingly, the seizures were still high despite a 39% drop in gold demand in the June quarter to 204.1 tonne.
These apart, to control the current account deficit, which hit a record $88.2 billion in 2012-13, RBI had last year imposed the 80:20 rule. However, in May, RBI allowed more entities to import gold, aimed at boosting supplies, although the 80:20 rule wasn't relaxed.
The hallmarking of jewellery has grown by 25% in the past one year after the government renewed its focus on encouraging jewellers to ensure quality of gold, according to Bureau of Indian Standards (BIS) director general Sunil Soni.
As many as 2.6-crore jewellery pieces were hallmarked last year at over 300 centres across the country. As many as 13,000 jewellers are registered with the BIS.
"Some improvement is certainly possible in the system today as it is not 100% reliable and is not accepted internationally. If the jewellery hallmarked as per the Indian standards is accepted internationally, Indian jewellery could have much better credibility," he said.