India's current account deficit (CAD), which is the excess of foreign exchange outflows over inflows, touched a historic high of 4.8 per cent of GDP in 2012-13, mainly due to rising imports of petroleum products and gold. A high CAD puts pressure on the rupee, which in turn makes imports expensive and fuels inflation. According to a finance ministry official, the CAD is expected to fall by almost 50 per cent to USD 45 billion in the current financial year. The Reserve Bank had last month projected CAD at less than USD 50 billion, or 2.5 per cent of GDP, down from USD 88.2 billion, or 4.8 per cent of GDP, in 2012-13.
The government had increased customs duty on gold to 10 per cent and banned import of gold coins and medallions, while the RBI linked imports of the metal to exports. India is the largest importer of gold, which is mainly utilised to meet the demand of the jewellery industry. Imports stood at about 830 tonnes in 2012-13.