Concerned over the widening current account deficit (CAD), the Reserve Bank of India (RBI) governor, D Subbarao said, the central bank would consider measures to contain the deficit in its next monetary policy review on June 17, since it has implications for the exchange rate and thereby for inflation.
The RBI governor emphasized that the country can run a large CAD one year but it cannot do it year after year and said though exports have to go up, there is a need to quickly deal with the import side issues. By adding further, he said that the government has raised the customs duty on gold import and the RBI has come out with some regulations to restrain the import of gold. But we need to increase exports in a big way and reduce dead-weight import like gold.
Gold imports into India, the world's largest consumer of the metal, stood at around 830 tonne in 2012-13, which widened the CAD to a record high of 6.7 percent in the third quarter of FY13. In April, gold import jumped by 138 percent to $7.5 billion the highest so far this year pushing up the CAD to $17.7 billion.
Meanwhile, the RBI has taken several steps to check the widening CAD as the central bank recently imposed curbs on import of the yellow metal by banks. Besides this, it has also put restrictions on banks and NBFCs for providing loans against gold coins as well as units of gold ETFs. The government has also taken steps like hike in import duty to restrict gold imports.