ANTI-DEFECTION LAW-Mere Tinkering

Active Lobby THE gold lobby was never dormant; it has always been active, lately all the more so.
On the eve of the July budget, a strident demand surfaced for (a) legalising the import of gold and (b) the issue of gold bonds. The argument for the first was that gold was anyway coming into the country, illegally but in sizeable quantities The estimate of gold smuggled into the country in 1990 is put at 177.6 tonnes whose value at the international price works out to roughly $ 2.2 billion and since smuggling involved its own cost, quite a good part of which might well be external, the country would be better off if it were to allow import of gold openly. Not that the logic behind the above argument is totally invalid. But the unstated assumption is that if gold import is freed, the quantity imported will more or less be the same as that currently being smuggled into the country. Once this assumption is relaxed and one allows for the fact that the quantity could be considerably larger, given the large demand for the yellow metal, for various purposes, in addition to genuine purposes such as for industrial use or even jewellery, the foreign exchange drain could well be several times greater than today's, even when one allows for the external costs of smuggling over and above the international price of gold.