New limit for gold purchase: Modi govt gives a boost to money laundering
The Narendra Modi government is all big talk when it comes to tackling corruption in the Indian Economy. But it seldom actually walks the talk. Take the demonetisation exercise, as an example, which is portrayed widely by the BJP as a fight against corruption.
On November 8, the day PM Modi announced his decision to unilaterally impose a policy measure that was going to wipe out nearly 86% of the country’s currency in circulation, there was a considerable flurry of activity across the country. In a primarily cash-intensive economy, any threat to the common citizen’s cash supply was always going to have cause pandemonium.
Amongst all this chaos was the considerable surge in gold purchases. Between the 8th and 9th of November, a staggering 15 tonnes of gold (estimated to be worth 5000 crores) was purchased according to the Indian Bullion and Jewellers Association (IBJA), which has nearly 2500 jewellers registered with it across the country. The actual purchase through the black market and illicit dealers probably means that the actual amount could be even higher.
This number is significant, as within the 7 hours between 8 pm on November 8 and 2-3 am on the morning of November 9, the amount purchased equaled a fifth of gold sales in a regular month in India.
The reason for this surge is simple enough to understand: Most people rushed to secure money (that would soon become worthless) in gold assets, a commodity which usually appreciates in India. It was a great way for certain people to launder their black money back into the system. At the time, a customer was required to submit the details of his PAN card on all purchases above Rs 2 lakh. Of course, this loophole was bypassed by paying dealers extra to split bills such that no single purchase would be greater than 2 lakhs.
Ten months later, on August 23, 2017, this limit was reduced even further to Rs 50,000 as the present government decided to include jewellery dealers under the Prevention of Money Laundering Act.
Astonishingly, last Friday, the government decided to suspend the requirement of furnishing a PAN card on purchases of gold altogether.
For a government that is prone to use Aadhar as a draconian device of suppression and has proceeded to make it compulsory for nearly everything under the sun (including Mid-Day meals in schools, the nutritional lifeline of children from vulnerable socio-economic backgrounds in India, studying in public schools) this is nothing short of shocking. It will now essentially allow more customers to purchase gold anonymously and promote the illicit laundering of money while the rest of the country takes a hit. While the poor continue to suffer as a result of the government’s apathy towards them, launderers have now been given the green signal to continue to ply their trade.
For this government, it is easy to talk about fighting corruption. It is also easy to produce poorly thought out experiments and make bold proclamations while the people suffer because. And with this government, it is easy to make the most misleading claims of them all: that you are somehow wrecking the economy to enable greater welfare for the poor.
Looks like the only thing they’ve actually managed to do is to make it easier for people to buy gold without any tax scrutiny. So what was the point of demonetisation in the first place?