The Indian government has announced new regulations to curb the legal importing of gold by expatriate citizens, claiming that jewelers and bullion wholesalers are using a loophole to get around severe restrictions to allowable quotas.
Indian citizens who have lived abroad for at least six months can legally bring home up to 1 kg of gold in bars, coins, and jewelry, as long as they pay the 10% import tariff. Starved for gold, jewelry companies and bullion dealers are advertising with travel agencies in foreign cities, looking for eligible Indians who are returning. The companies pay the person's airline ticket if they will bring back 1 kg of gold (which is also paid for by the company.)
It didn't take Indian customs officials long to catch on to what was happening, but it wasn't until now that the decision to clamp down on the practice was made. From now on, passengers must declare in writing where the money came from to pay for every gold item brought into India, as well as who paid for their airplane ticket.
Critics of the government's gold quotas note that tons of gold are still entering the country, by smuggling. The same amount of money is leaving the Indian economy, but because the gold sales don't show up on the government's books, it makes the trade deficit like it is shrinking when it is not.