Gold smuggling in India up due to high import duties

Indian gold smugglers are having a field day with new regulations on imports of the precious metal.

A large hike in duty on gold imports has meant that Indians are now paying a 20 percent premium for gold, a popular item for celebrations and weddings in the South Asian country.

The tariff spike and a weakening rupee have meant that smuggling has become profitable.

Gold in India now costs $1,400, an ounce – a far cry from the $1,200 per ounce on the world market.

Thanks to the new tax and weaker rupee, that’s about a 20 percent premium over the world market price, hovering just under $1,200 an ounce.

Smugglers have been hiding gold in imported cars and there are even reports of people using mules to swallow the gold before crossing borders.

They are hunting around Asia to buy the precious metal and sneak it back into India.

Customs officials are said to be cracking down on travelers coming from Dubai, Sri Lanka, Thailand and Singapore with smuggled gold.

Indian authorities have begun rewarding whistle-blowers for their help in catch the culprits.

Gold is India's second largest import after oil, so important that the new tariff has actually increased the current account deficit to a historic high of 4.8 percent of India’s gross domestic product.

That, in turn, has pushed down the rupee.

The increased prices have dramatically lowered gold-buying by about 32 percent and is quickly ensuring that India loses its place as the world's number one buyer to China.