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Govt Mulls Cutting Down On Gold Import To Contain CAD


As it is the crude oil situation has aggravated fiscal deficit and hence CAD or current account deficit concerns, so to mitigate the risk at hand the government is mulling restricting gold imports into the country.

Govt Mulls Cutting Down On Gold Import To Contain CAD

Current account deficit is an important macroeconomic parameter that reflects the country's economic stability and is computed as the excess amount of exports and the income receivable less the imports and income payable amount.

Gold is the second highest commodity next only to crude oil that is imported from across the Indian borders. International crude oil prices which have lately seen boiling with prices touching new highs of $80 per barrel are seen as the main factor pushing CAD further.

In the April- December period of 2017, CAD was 1.9% of GDP as against just 0.7% in the year-ago period mainly due to rising crude oil price and trade deficit.

In a ratings, credit rating firm CARE said, "With the expectations of higher trade deficit, moderate FPI (foreign portfolio investment) inflows, we are expecting the CAD to go up to 2-2.5 percent of GDP in 2018-19".

Also, crude oil imports is expected to surge to levels of USD 93 billion in 2018-19 from USD 70 billion in 2017-18 giving a push to CAD to USD 65-70 billion or nearly 2.4 percent of GDP in the current financial year.

Though in the last MPC meet, it was hinted that CAD is on a constant rise, Narendra Modi led government tried to contain it below 2% of GDP through the entire term.

Story first published: Tuesday, May 29, 2018, 15:23 [IST]
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