A CAG report of 2016 had pointed out irregularities in the gems and jewellery sector, much before the bank fraud involving Nirav Modi was reported
GN Bureau | March 7, 2018
There was a sharp increase in the share of import of gold after 2007‐08 because of its rise in its asset demand. Interestingly, in 2013‐14 the export of rough diamond and non-monetary form of gold was also at maximum levels of 10.10 and 11.04 percentages, respectively, said a CAG report that was tabled in parliament in 2016.
“The difference between the transaction wise valuation of trade between India and its exporting/importing partners indicated that India ranked 4th in volume of illicit financial outflows in the world. This was almost $83 billion in 2013 and growing, akin to the last ten years trend. It is around 4.5 percent of India’s GDP (against global average of 4 percent) and totally comprises of outflows due to trade mis‐invoicing,” said the performance audit on natural or cultured pearls, precious or semi‐precious stones, precious metals, metals clad with precious metal and articles thereof, imitation jewellery, coins.
The latest banking scandal to hit the headlines is about billionaire Nirav Modi who is involved in Rs 11,300 crore fraud at a Punjab National Bank branch.
The CAG performance audit has revenue implication of Rs 1,003.37 crore in addition to systemic issues worth Rs 19,522.67 crore and internal control matters which could not be quantified.
The CAG report said that the gems and jewellery industry occupies an important position in the Indian economy as it is a leading foreign exchange earner and one of the fastest growing industries. It contributed to 15 percent of the national export basket. The major product categories of this industry are gold and diamond jewellery. Gold jewellery forms around 80 percent of the Indian jewellery market while the remaining market demand is of studded jewellery that includes diamond studded as well as gemstone studded jewellery.
Over 65 percent of the world’s polished diamonds is manufactured in India in terms of value, 85 percent in terms of volume and 92 percent in pieces. India’s diamond manufacturing sector employs about ten lakh people across the country. Majority of the diamond manufacturing activities takes place in Surat, Gujarat. The Bharat Diamond Bourse in Mumbai, a modern trading complex which began its operations in 2010, is the largest bourse in the world, and accounts for nearly 90 percent of India’s total diamond trade. The manufacturing of jewellery and coloured gemstones is centred at Jaipur, which is the world’s largest manufacturing centre.
The CAG report noted that rough diamond, precious coloured gemstones and gold are not produced in India. These are imported from major source countries or trading hubs. These are essential inputs for the sector.
The sector in India has a unique availability of traditional skills, a huge socio‐ economic importance and a large domestic market for different kinds of plain and studded jewellery. This sector also generates a fair amount of economic activity and contributes to the GDP of the country if value is added to the final product. Currency and asset demand of gold in India is one of the highest in the world vis‐a‐vis other currencies and investment asset categories. Given global demand for Indian design and workmanship, Cut and Polished Diamond (CPD) and jewellery has been one of the top exporting products for decades. The import of gold, jewellery et cetera increased from Rs 3,50,396 crore in 2010‐11 to Rs 3,81,515 crore (9 percent) in 2014‐15. Export of similar goods also increased to Rs 2,53,940 crore (28 percent) in 2014‐15 from Rs 1,98,886 crore in 2010‐11.
The report went on to say that the trade deficit has decreased from 43 percent (FY 11) to 34 percent (FY 15) but the duties foregone have increased from 14 percent (FY 11) to 20 percent (FY 15) of the value of imports. During this period, value of the US dollar increased by 34 percent making the imports proportionately expensive and exports cheaper. The entire five year period saw, imports of gold as a major component of the imports but it suffered a negative Net Foreign Exchange Earnings (NFEE) vis a vis corresponding exports of jewellery.
India barely produced diamond or gold. It was the highest average importer of gold in the last five years.
The sector was last audited in 2008 however most of the improvements recommended by audit were not achieved.
Lack of an impact assessment of the scheme prior to its implementation and an outcome assessment after implementation, or on exit, rendered the policies ineffective due to insufficient coordination, control and monitoring; cases of operational malfunction, non-compliance; inadequate ICT infrastructure for tax administrations, border control, facilities and certification, said the CAG report.
Read the CAG report - Union Government Department of Revenue Indirect taxes – Customs No. 6 of 2016
News profession is organic in nature, requires responsibility and discipline, and there is no room for mistake. To maintain high standards of accuracy you need discipline and hygiene in the newsroom. Sudhir Chaudhary, editor in chief of Zee News, Zee Business and Wion, has said that a TRP-driven business m
When Dharmendra Pandey, a fruit-seller had to leave Mumbai after the imposition of the lockdown during the Covid-19 pandemic, and return to his village in Uttar Pradesh, he was staring at economic uncertainties ahead. Little did he know that his 16-year-old son, Mahavir, had acquired skills that would come
Wearing a face mask is the first line of defence against the novel coronavirus, along with maintaining social distance and frequently washing hands with soap. More than six months after the outbreak of Covid-19, nearly 90 percent of people in India have become aware of the necessity of wearing a face mask,
Is India finally gaining an upper hand over the Covid-19 pandemic? After weeks of new cases hitting 90,000-plus every day, the tide seems to be turning, as the number came down to 75,083 on Tuesday, and the recoveries were not only higher than that but crossed the 1 lakh mark too. The countr
Sit Your Self Down A Novice’s Journey into the Heart of Vipassana By Gayatri Jayaraman Hachette India, 212 pages, Rs 399 As stress and strife increase in daily life, more and more people are turning to meditation as an all
On completion of one year of the chairmanship of the Association of World Election Bodies (A-WEB), the Election Commission (EC) of India on Monday hosted an international webinar on the theme of “Issues, Challenges and Protocols for Conducting Elections during COVID-19 : Sharing Country