Why gold smuggling in south India is rampant

Gold smuggling remains rampant in southern India due to a combination of historical, economic, and geographical factors.

The recent arrest of Kannada actress Ranya Rao and past cases, such as the Kerala gold smuggling scandal, highlight how deeply entrenched the issue is.

Why is gold smuggling prevalent in southern India?

1. Gulf connection and high gold demand

Southern states like Kerala, Tamil Nadu and Karnataka have deep economic and cultural ties with the Gulf region, where many south Indians work. The large diaspora sends remittances home, often in the form of gold, as it is a traditional and safe investment.

However, high import duties in India make smuggling of the yellow metal an attractive option for both organised syndicates and individuals.

2. Strategic location and coastal vulnerability

Kerala, Tamil Nadu and Karnataka have long coastlines and major international airports that serve as entry points for smuggled goods. Kochi, Chennai, Bengaluru and Thiruvananthapuram airports witness heavy inbound traffic from West Asia where gold is cheaper. 

Smugglers exploit the high volume of passengers and cargo to sneak in gold undetected.

3. Tax evasion and high import duties

India imposes heavy import duties on gold, which fuels the black market. In the Union Budget 2023, the effective gold import duty stood at around 15%.

Smugglers bypass these taxes, making gold available at a cheaper rate in the grey market, which appeals to jewellers and investors.

4. Political and bureaucratic nexus

Several gold smuggling cases in south India involve individuals with political or bureaucratic connections. The Kerala gold smuggling case of 2020 implicated government officials, including a former principal secretary to the chief minister.

This suggests that the illegal trade enjoys a degree of protection, allowing it to thrive despite periodic crackdowns.

5. Role of high-profile individuals

The involvement of celebrities like Ranya Rao shows how smugglers sometimes use unsuspecting or influential individuals as couriers.

Given their access to VIP lounges and reduced scrutiny, such individuals become ideal carriers for smuggled goods.

Why are such cases rare in north, east and west India?

1. Different trade routes: Northern and western parts of India rely more on land routes for illicit gold trade, particularly through Nepal, Bhutan and Pakistan. However, these regions lack the sheer volume of air traffic from gold-rich Gulf countries that the southern states handle.

2. Economic and cultural factors: Southern India has a historically strong affinity for gold, especially in Kerala and Tamil Nadu, where gold plays a crucial role in weddings and savings culture. While other regions also value gold, the demand intensity is lower.

3. Alternative smuggling channels: Smugglers in the western region, particularly in Gujarat and Maharashtra, rely on sea and land-based networks, such as under-invoicing in legal gold imports. Similarly, northern India sees gold being smuggled via Nepal, but these operations are often lower in volume and more discreet than the high-profile airport seizures in the South.

Southern India’s combination of high demand, Gulf connections and porous airport security makes it a hotbed for gold smuggling. The involvement of high-profile figures underscores how deeply rooted the problem is. While smuggling occurs across India, the sheer scale and frequency in the South make it more visible. If enforcement remains inconsistent and gold import duties stay high, the illegal gold trade is unlikely to disappear anytime soon.

Gold smuggling in India has been a persistent issue, with significant variations across different regions. Recent statistics indicate a higher prevalence of gold smuggling incidents in southern India compared to other parts of the country.

National overview

In 2022, authorities registered 3,982 cases of gold smuggling, resulting in the seizure of approximately 3,502 kg of gold. 

Southern India specifics

Kerala: In 2022, enforcement agencies seized 730 kg of smuggled gold across the state's airports, registering 1,008 cases. 

Karnataka: At Kempegowda International Airport in Bengaluru, multiple seizures have been reported, including high-profile cases involving individuals with alleged connections to influential figures.

Comparative insight

Gujarat: At Sardar Vallabhbhai Patel International Airport in Ahmedabad, authorities seized 241.1 kg of smuggled gold in the fiscal year 2024, marking a 65% increase from the previous year. 

North-eastern states: Recent reports have highlighted the Northeast as an emerging concern for gold smuggling, with traffickers employing new techniques to exploit this region's vulnerabilities.

These statistics underscore the pronounced incidence of gold smuggling in southern India, particularly in Kerala and Karnataka, compared to other regions. Factors such as strategic coastal locations, high demand for gold and established networks contribute to this regional disparity.