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Govt may use its gold reserves to contain CAD: Commerce Minister

28 Aug 2013 Evaluate

Concerned over the widening current account deficit (CAD) of the country, Commerce and Industry Minister Anand Sharma suggested with an off-beat idea that the government can use a fraction of its gold reserves in order to contain high CAD. Anand Sharma said that at present the country has over 31,000 tonnes of declared gold reserve and if 500 tonnes is monetized at current value, then it will help to contain a large part of country widening CAD. At current market rates, 500 tonnes of gold is valued at about $25 billion.

India’s CAD widened to a record high of 4.8 percent of GDP in the previous fiscal on account of high gold imports and crude oil prices. During April to July, the country’s gold imports rose 87 percent to 383 tonnes despite a large number of steps taken by the government and the Reserve Bank of India (RBI) to curb demand for the yellow metal. The government recently raised customs duty on gold to 10 percent from 8 percent earlier.

Meanwhile, the government has set target to contain the CAD at 3.7 per cent of GDP in the current fiscal, however achieving this target seems to be a difficult task with a hoard of obstacles such as high inflation, depreciating rupee, and slowing down economy.

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