Expressing his concern over the widening current account deficit (CAD), Finance Minister P. Chidambaram has said that the government would bring down CAD to 3.7 percent of the gross domestic product (GDP) in the current financial year by cutting imports, especially of gold, silver, oil and non-essential items. India’s CAD widened to a record high to $88.2 billion or 4.8 of GDP in the previous fiscal on account of high gold imports and crude oil prices.
Chidambaram said that finance ministry in consultation with the Reserve Bank of India (RBI) and other ministries including oil and commerce among others had outlined a plan to contain CAD at $70 billion in the FY14, which will amount to 3.7 percent of GDP. By adding further, Finance Minister said that the government is confident of fully financing the current account gap and has added $3.8 billion to the reserves. He added that the recent volatility in the currency markets was largely due to the growing concerns over the CAD, reflecting pressure on the domestic currency. Rupee value depreciated to a record low of 61.80 to the dollar on August 6.
The government will also take measures to enhance capital inflows into the country that will help reduce the current account gap and help to stabilise the rupee. The possible steps to boost capital inflows into the country include bond issues by state-run companies and easier norms for overseas borrowings among others.
