Falling gold imports to axe CAD: PMEAC

Decline in gold imports could reduce the current account deficit to 3.5% of GDP,said PMEAC.

Written by Agencies | New Delhi | Published: September 18, 2012 4:55 pm

The Prime Minister’s Economic Advisory Council today said it expects gold imports to come down this fiscal which could reduce the current account deficit (CAD) to 3.5 per cent of GDP.

“We do expect CAD in the current year,that is 2012-13,to come down to something like 3.5 per cent from the high level of 4.2 per cent of GDP last year,” PMEAC Chairman C Rangarajan said at an event here.

India’s CAD had touched a record high of 4.2 per cent of GDP in 2011-12,on the back of a wider trade gap and lower capital inflows.

Rangarajan said he expected gold and coal imports to decline in the current fiscal. He also said the capital flows should be encouraged into the country in the short term.

“I believe gold imports will come down this year… I think as inflation comes down and as the attraction for gold becomes less we should be able to import less gold.

“And also,if you increase the domestic production of coal,then the import of coal which we are doing on a large scale will also come down,” he said.

In the 2011-12 fiscal,India’s gold imports stood at USD 60 billion and the quantum of import was 1,067 tonnes.

In the April-June quarter of the current fiscal,however,gold imports had contracted by 18.4 per cent year-on-year to Rs 71,912 crore (USD 13 billion).

Besides,according to a draft paper on Energy by the Planning Commission,India’s coal imports are likely to touch a whopping 185 million tonnes (MT) by 2017,almost 20 per cent of the international dry-fuel trade amid widening demand- supply deficit.

Rangarajan also said,”We should encourage capital inflows so that financing of the current account deficit does not become difficult.”

On the high rate of price rise,Rangarajan said the inflationary expectations would decline because of the improving rainfall.

“By mid of September we know that monsoon is not as bad. Therefore,I expect inflationary expectations to come down in the coming weeks and months,” he said.

The wholesale prices-based inflation in August stood at 7.55 per cent,up from 6.87 per cent in July. Retail inflation,on the other hand,was up 10.03 per cent during the month,from 9.86 per cent in July.

However,Rangarajan said that with the recent diesel price hike could stoke inflation in the short-term. The government last week hiked diesel prices by Rs 5 a litre,

which economists said could have a bearing of up to one per cent on inflation.

“What the RBI will look at,in my view,is the behaviour of inflation exclude the direct impact of the increase in diesel prices and see whether there is a momentum towards lower inflation. It is on that basis that monetary policy will

be determined,” he said.

Rangarajan also said the committee on sugar decontrol will submit their report in the next 7-10 days.

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