India’s socio-economic realities have evolved significantly over the past four decades, particularly as far as attitudes to wealth accumulation are concerned. Gold is today no longer negatively associated with crooked businessmen, but rather positively with the consumerist aspirations of middle-class India. It is used to project enhanced family status at events such as the ‘great Indian wedding’, and is perceived as a high-return investment and a hedge against inflation.

Demand for gold has consistently risen 14% annually since 2001, with prices altogether increasing eight-fold. The Indian love affair with gold continues even as the economy strains under the weight of gold imports that degrade the fiscal balance. Gold is metaphorically to many Indians what opium was to the Chinese in the 19th century: an addictive escape from institutional decay and social stagnation. But hoarding gold pits the individual and their family against the government and its need to keep liquidity flowing in order to grow the economy.

This report examines three questions:

1. Why did an illicit economy around gold imports emerge in India?
2. What are the methods and routes used by smugglers?
3. Why has the illicit economy proved resilient to countermeasures by the government?

Gilded aspirations: Illicit gold flows to India

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Prem Mahadevan

Before joining the GI, Prem Mahadevan worked for almost nine years as a Senior Researcher with the Center for Security Studies at the Swiss Federal Institute of Technology in Zürich. He specialized in research on organized crime, intelligence and irregular warfare. He has lectured on international relations courses at universities in Austria and the Czech Republic, and been invited to brief parliamentarians and high ranking security officials from across Europe and Asia, besides NATO and the Global Counterterrorism Forum. He has co-authored policy studies for the Swiss foreign ministry and written a book on counterterrorist special operations for the Indian Army. His academic publications include two books on the theme ‘intelligence and terrorism’, besides several peer-reviewed journal articles and chapters in edited volumes.

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