Planning Commission today said declining gold and crude oil prices will have a favourable impact on the country's macro-economic parameters especially the Current Account Deficit (CAD), which rose to all-time high level of 6.7 per cent for the quarter ended December 2012.
"It certainly makes our macro economic balancing exercise easier", Planning Commission Deputy Chairman Montek Singh Ahluwalia said when asked about the impact of falling gold and crude oil prices on the Indian economy. Falling for the third day in succession, gold prices today plunged by Rs 1,160 per ten grams to 21-month low at Rs 26,440. It has now lost a whopping Rs 3,160 per ten gms in the last three trading sessions. The gold prices had touched the all-time high of Rs 32,975 per ten gms on November 27, 2012. Crude oil prices also tumbled in Asia with Brent falling below USD 100 a barrel.
According to Ahluwalia: "There is no question that gold prices have calm down and will have favourable effect (on the economy)... Now people will not rush into gold as an investment asset. They will look for other more productive assets. I think that would be good for the economy." He further said slippage in gold prices would also make the task of managing CAD "a lot more easier." The CAD, which is the difference between inflow and outflow of foreign currency, widened to a high of 6.7 per cent of GDP in December quarter to USD 32 billion on account of surge in oil and gold imports, besides weak exports. It was at USD 20 billion (4.4 per cent of GDP) in the corresponding quarter of last fiscal. Even at an estimated level of over 5 per cent during 2012-13, the CAD would be nearly double the mark of 3 per cent during 1991 the year when India faced the foreign exchange crisis.