Concerned over the widening Current Account Deficit (CAD), Prime Minister’s Economic Advisory Council Chairman C Rangarajan said, India needs to bring down its gold demand from about 1,000 tonnes a year to 700 tonnes which prevailed only a few years ago. While, addressing the 6th International Gold Summit, Rangarajan said, it is essential to check the increased gold imports, which is adversely impacting the CAD, which touched an all-time high of 6.7% of GDP in the third quarter of FY13.
In the previous two fiscals - FY12 and FY13, the country’s gold imports in quantitative terms stood at 1,079 tonnes and 1,017 tonnes respectively, whereas in value-terms, gold import was about $56 billion in FY12 representing around 72% of the CAD. In the FY13, it was $54 billion accounting for 57% of the CAD.
By adding further, Rangarajan said, sharp increase in gold imports in April was primarily due to the sudden fall in the prices of gold. However, he expects gold demand likely to fall as easing of general inflation rate will make investment in financial products more attractive than the yellow metal. Also, the steps taken to curb gold demand are expected to bring down CAD by 0.4-0.5% of GDP in the current fiscal.
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