Gold Smuggling in India and Its Effect on the Bullion Industry

Abstract

This study strives to examine when and where most of the gold smuggling takes place in India. It further analyses the causal relationship between smuggled gold and other macroeconomic variables. Finally, it analyses how the smuggled gold affects the Indian bullion industry. The data related to gold smuggling has been sourced from the website of the Directorate Revenue Intelligence and analysed using graphs and the Granger causality test. The variables used in the study are the quantity of smuggled gold, exchange rates, the major stock indices in the world, the number of auspicious days in a month, domestic and international gold prices, India’s jewellery export, the GDP, customs duty, and the domestic gold supply. The results revealed that most of the gold smuggling takes place on Fridays and mostly occurs in the months of October, November, and December. The states of West Bengal, Delhi, Maharashtra, and Tamil Nadu account for most of the gold smuggling in India. A positive correlation is observed between the smuggled gold, India’s gold demand, the number of auspicious days in the month, India’s jewellery export, India’s GDP, India’s domestic gold supply, and stock indices such as SENSEX, FTSE100, DFMGI. Gold smuggling in India is caused by India’s gold demand, the level of jewellery export, the GDP, domestic and international gold prices, and India’s customs duty.