India major recipient of Swiss gold exports
India is now seen as the biggest recipient of gold exports from Switzerland, raising questions in government about black money (illicit funds) held in Swiss banks being imported as bullion.
Posted: Monday , 11 Aug 2014
Mumbai (Mineweb) -
Indian imports of gold from Switzerland have raised eyebrows in government circles. Data released recently by the Swiss Government showed a spike in bullion exports to India in June. Over 40% of the gold leaving Switzerland is reportedly landing in India.
Data showed that India accounted for around 42% of total June exports. Compared to the 33% of bullion exports to India in May, this has set the alarm bells ringing loud and clear.
Though India was recently replaced by China as the world's largest consumer of the precious metal, it is still a major consumer of bullion. In June, the value of Swiss derived gold and silver coins was worth about $4.3 billion.
What could be the reason for such colossal shipments of gold leaving Switzerland for India? While India’s Finance Minister Arun Jaitley has asserted in television interviews that there was no evidence yet to indicate that unaccounted money was entering through gold imports, as was being discussed in government circles, Indian investigative agencies like the Intelligence Bureau and even the customs authorities are said to be tracking the shipments.
Even as a debate on alleged black money stashed by Indians in Swiss bank accounts continues in India's Parliament, data shows that India now accounts for the greatest amount of gold and silver leaving Switzerland shores, the largest for any single country.
Data showed that total export of gold, silver and coins in the month of June 2014 stood at 3.9 billion Swiss francs (SFR), of which India alone accounted for SFR1.63 billion.
This has taken the overall Swiss exports so far in 2014 to SFR32.1 billion . Of this and to date, shipments to India have reached nearly SFR7.3 billion.
Immediately after taking over as minister, India’s Finance Minister Jaitley had written to the Swiss authorities seeking details of the unaccounted money stashed in Swiss banks.
Some analysts have termed the move as a bid to uncover the possibility of Indian black money stashed in Swiss banks. Reports have indicated that much of this money is being re-routed back to the country in the form of gold, especially because of the tough stand of the newly installed Indian Government.
The research body, Centre for Global Development, too, has alluded to the same in a study. The report said India’s financial savings has been falling relative to the GDP, even as gold imports were steadily rising. This, it felt, was a sign that the gold economy was based significantly on unaccounted resources.
Incidentally, India’s share of gold imports has doubled in the last 14 years. Despite a 400% rise in the rupee and the gold price in the last ten years or so, gold demand from Indian consumers remains robust.
The National Democratic Alliance government led by Prime Minister Narendra Modi, after being sworn in in May, had made it clear that on top of its agenda was the issue of black money stashed abroad. It has even constituted a special task force to investigate the entire issue.
On its part, Switzerland has committed that it would cooperate in India's fight against black money and has also invited an Indian delegation to visit Berne for discussions in this regard.
However, a new strategy of `layering' through gold and diamond trade has come to light at Swiss banks, to thwart any attempt for identification of real beneficiary owners of funds entrusted with them. Layering is a key stage in money laundering and involves moving illicit funds around the financial system through a complex series of deals to complicate the paper trail.
Data showed that while the United Kingdom and Hong Kong were two big export markets for Switzerland's gold, accounting for 139.4 tonnes and 84.6 tonnes, respectively, the gold demand from India has leaped to new highs.
Incidentally, gold exports to India in January 2014 stood at less than one billion Swiss francs, but has been consistently rising since then.
In contrast, Switzerland's overall bullion exports had risen in February to over SFR8 billion, from about SFR7 billion, but fell for three consecutive months thereafter to SFR3.7 billion in May.
In June, Turkey came a distant second after India with less than SFR500 million of Swiss bullion exports. Other major destinations were UAE, Singapore and Hong Kong, as also major economies like US, UK, China, France and Germany.
Could it be black money (illicit funds) being routed to the country? Though the Swiss say it is too early to see any nefarious pattern in the high export, Anne Cesard, deputy head of communications at the Switzerland State Secretariat for International Financial Matters, was quoted in a newswire report as saying that both these issues should not be linked at this point of time.
India’s black money (illicit funds) is estimated to be about 8% of its GDP (or nearly $1.9 trillion in 2013, and exists mainly due to corruption and the existence of large scale cash transactions.
According to a report by the Washington based non-profit research and advocacy organisation Global Financial Integrity, between 2002 and 2011, nearly $344 billion of illicit money moved from India to various tax havens. Another estimate by the Associated Chamber of Commerce and Industry of India says nearly $2 trillion of black money from India is stashed abroad.