Tuesday, 18 June 2013

Increased oil, coal output and restraining gold consumption can contain CAD: FM

In order to  increase production and contain the current account deficit (CAD), Finance Minister P Chidambaram said, the country should get its policies and priorities right as long-term measures and the only way to contain CAD is to increase the domestic production of oil & coal and restrain the consumption of gold.

Chidambaram said the main reason for India's large CAD is that the country has huge dependence on import of certain items like oil, coal and gold. Touching a record high of 6.7% of GDP in the third quarter of 2012-13, India’s CAD is likely to be around 5% in the 2012-13 fiscal. Further, high CAD is also impacting the domestic currency, which recently fell to its lifetime low level of over 58.90 against dollar.      However, as per the apex bank - RBI, India can sustain CAD of around 2.5%.

However, finance minister is of view that India continues to remain a desired destination for FDI and FII, despite recession in major economies. By adding further he said, in spite all probability the government was able to finance the CAD and also added around $3 billion to the forex reserves in 2012-13 and expressed confidence that in 2013-14 also CAD will be financed without dipping into reserves.

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