The man arriving at Kannur International Airport in Kerala in southern India caught the attention of customs officials right away.
A quick search of his clothes revealed why — in between the two stitched-together pairs of jeans he was wearing was a thin layer of gold dust that had been made into a paste and applied like paint to the cloth. In all, the man was carrying some 302 grams of gold in his pants worth about $20,000, authorities said.
For customs officials in a country that has emerged as one of the biggest gold smuggling centers in the world, this was a pretty normal day.
In 2020, Indian officials say they seized $185 million worth of gold being smuggled into the country. But that’s a drop in the bucket; experts estimate that around one-fifth of the 1,000 tons of gold that entered India last year arrived illegally. That’s equal to about $11 billion.
“This puts India not only at the heart of the world’s gold manufacturing sector, but also at the heart of an illicit supply chain with tentacles that extend around the globe.”
— Impact, a Canadian NGO that tracks the trade in minerals and precious stone from conflict zones
The reason is simple: India is one of the largest consumers of gold in the world but isn’t even in the top 50 in terms of production. High tariffs on gold imports have resulted in a booming smuggling industry, officials say.
“Needless to say, the increase in the incidence of duty on imported gold has incentivized the smuggling of the yellow metal,” India’s Directorate of Revenue Intelligence wrote in its annual report on smuggling last year.
One of the most frequent ways of getting the gold into the country is on the bodies of air passengers flying in from the United Arab Emirates, which is one of the world’s largest gold hubs, officials say.
In 2020, Indian officials say they seized $185 million worth of gold being smuggled into the country. Customs officials have found gold hidden under elaborate wigs, woven into the stitching of suitcases or affixed to feet and underwear.
MarketWatch photo illustration/Customs Preventive Commissionerate, Cochin, iStockphoto
Smugglers typically enlist Indian guest workers in the Middle East to carry the contraband home stashed in a variety of ways. Customs officials say they often find the swag packed in capsules inserted in a passenger’s rectum. But they also have found gold hidden under elaborate wigs, woven into the stitching of suitcases or affixed to feet and underwear.
In one case last year, 30 kilograms of gold worth more than $2 million was found in a diplomatic courier bag, sparking a political scandal.
Many Indian workers in the Middle East hail from the state of Kerala, so airports there have emerged as hotspots for smuggling, with seizures occurring nearly every day, officials say. Last year, customs agents say they nabbed a record 540 kilograms of gold in the state alone — more than double the figure from the previous year, and about a fifth of all that was seized in the country.
A considerable amount of illegal gold is also smuggled by land over the country’s eastern border with Bangladesh, customs officials say.
Much of the imported gold ends up being used for domestic purposes. India is home to a huge jewelry industry, and gold has long had strong cultural and economic significance, being used to celebrate milestones like births and weddings, as well as a secure way to stockpile wealth during periods of financial instability.
Impact, a Canadian non-government organization that tracks the sourcing of minerals and precious stones from conflict zones, estimates that all the gold held by individuals in India is greater than that held by the central banks of the United States, all Eurozone countries and China combined.
But around 20% of the jewelry manufactured in India is exported and sold all over the world, including in the U.S., Impact says. The organization says that given the amount of gold being smuggled into India, it is almost certain that some of it originates from conflict zones, particularly in Africa.
“This puts India not only at the heart of the world’s gold manufacturing sector, but also at the heart of an illicit supply chain with tentacles that extend around the globe,” the organization wrote in a report in 2019.