WEST BENGAL-Condoning Violence

of 168 tonnes; and (ii) legal supplies of 188 tonnes consisting of 93 tonnes of NRI imports, 2 tonnes from domestic mines, 75 tonnes of scrap and 18 tonnes of imports under replenishment scheme for jewellery exports. Again, as per the WGC, India has purchased 118 tonnes out of the 623 tonnes of gold bought round the world in the first four months of 1993. The foreign exchange spent on 260 tonnes of gold in 1992 would work out to approximately S 2.8 billion. It is now widely acknowledged that even the legal import of gold through the NRI route (140 tonnes in 1992, valued at US $ 1.5 billion) is by and large undertaken and financed by the smugglers' network. Therefore, for both smuggled gold and NRI imports, there would be demand for dollars which has to be financed from the Indian sources through the 'havala' route (except for genuine imports by individual NRIs). There is an insatiable demand for gold in India and gold is known to be a price- elastic commodity with the high elasticity further stimulated by an environment of liberal imports and laxity in enforcing tax compliance. Any governmental measure which goes to reduce the domestic price of gold will thus bring about a more than proportionate increase in demand for gold, which is what happened in 1992. The price of gold which was ruling at Rs 4,770 per 10 grams towards the end of February 1992 in the Bombay bullion market crashed to around Rs 4,200 after the new gold policy was announced and generally ruled 8 to 15 per cent lower throughout 1992. But the demand for gold jumped by over 60 per cent in 1992. The logic of the WGC's arrival in India and the government's new gold policy imply free import of gold very soon. As a result, there will be a growing outlay in foreign exchange on gold imports and it is unlikely that this foreign exchange outflow will be compensated for by the inflow of additional foreign exchange due to arresting of capital flight, including that by the 'havala' route adopted by the NRIs.