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It is difficult to believe that it was the same P. Chidambaram, India’s finance minister, who freed imports of gold in 1998 during an earlier stint in the same ministry. That the ban on import of gold was ineffective was long known. That it had turned gold smuggling into a lucrative business was also common knowledge. But there was a chance that the import ban was less than completely ineffective. If it had been even 99 per cent ineffective, its removal would have led to an increase in foreign exchange expended on them. That was the risk no finance minister was prepared to take. So, the government supported and aided the vast smuggling enterprise for decades, and made Haji Dawood, the prime smuggler, a billionaire. There was widespread suspicion that his tentacles extended into the North Block, and that influential bureaucrats, not to mention politicians, were beholden to his bounties. This could never have been suspected of Manmohan Singh, but even he kept his hands off the racket.

It was Mr Chidambaram who finally caught the bull by the horns and abolished gold import controls. The decision showed conviction and courage. That is why it is so ironic that he has turned into a passionate restrictor of gold imports and a precious friend of gold smugglers. If it had not been for his earlier record as a liberalizer, his facilitation of smuggling would not have been surprising; after all, politics and the breach of law have enjoyed a cosy relationship for a long time. Perhaps he honestly doubts that the import duty he has imposed on gold makes smuggling viable. It is pretty simple economics. Mr Chidambaram did encounter some economics in the course of his education; and even if it has rusted, he employs a host of economists in his ministry. So it is not possible that he does not know that much economics. If he does, his actions can be explained only on the assumption that he thinks standard economics is bunkum and that he has discovered the truth.

Now he wishes to try import substitution in gold. He surely knows that not far from his constituency, gold was mined in Kolar for centuries; it was closed after gold imports made it uncompetitive. So, maybe he would like the mine to be reopened, miners to be sent miles down, and a handful of ounces to be produced at a prohibitive cost. If that is his wish, there is no reason for him to stop there. Almost anything can be produced in this country if cost does not matter. The finance minister can ban all imports and get them produced at home without any thought of cost. That would make the country much poorer and send the fiscal deficit through the roof. But that is conventional economics; all that the finance minister has to do is to reject it.