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Fugitive Jewelers Rob Indian Business of Trade Pricing Edge

  • Ban on trade financing tool raises cost of funds for industry
  • Costs may choke exports, which may lead to a wider trade gap
Updated on

Banks weren’t the only victims of fugitive jewelers Nirav Modi and Mehul Choksi, who allegedly orchestrated a $2 billion fraud. India’s trade may be an unsuspecting casualty.

As the fraud unraveled, the central bank stepped in and banned short-term financing in foreign currency called Letters of Undertaking to limit the damage to the financial system. The result was the cost of funds for exporters and importers rose as the industry was forced to seek new credit tools, said Ajay Sahai, director general of the Federation of Indian Export Organisations in New Delhi.