Steps underway to reduce gold imports: FM

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CHIDAMBARAMNew Delhi August 12;The government intends to reduce the import of gold, silver, oil and non-essential goods to contain Current Account Deficit (CAD) to 3.7 per cent of the gross domestic product (GDP) in the current fiscal and check the rupee slide. This would mean increased duties on import of these items.

Making a statement in the Lok Sabha on Monday, Finance Minister P. Chidambaram said the government would also permit public sector financial institutions and oil companies to raise funds abroad and liberalise norms for non-resident deposit schemes to increase capital inflows into the country.

“Notifications in respect of tariff rates will be laid before Parliament in the usual course”, he said, adding that these measures would help contain CAD at $ 70 billion, while the inflows would increase to a level that will be sufficient to finance the CAD.

“If the CAD is contained at $ 70 billion, it will amount to 3.7 per cent of the GDP (as against 4.8 per cent in 2012-13)”, he said.

Pointing out that Indian economy too was facing challenges like global economy, Mr Chidambaram said, “We believe that we have to do more to contain CAD, to reduce volatility in the currency market and to stabilise the rupee.”

In order to increase capital inflows, Mr. Chidambaram said public sector financial institutions would be allowed to raise quasi-sovereign bonds to finance long-term infrastructure needs.

Besides, he said, PSU oil companies would be allowed to raise additional funds through External Commercial Borrowings (ECBs) and trade finance. The government would also liberalise ECB guidelines as well as non-resident (NRE/FCNR) deposit schemes.

Mr Chidambaram said these measures were being taken after extensive consultations with the Ministries of Commerce and Industry, Petroleum and Natural Gas and Reserve Bank of India.

“We have the Ministry of Commerce’s estimates of exports and imports and of trade gap. Based on these consultations, we have estimated the CAD for the current year and have decided on certain measures that would ensure that the CAD will be fully and safely financed in the current year”, he said.

Noting that one of the main challenges facing the economy is the CAD, Mr. Chidambaram said that in 2011-12 the government had to draw reserves of $ 12.8 billion to finance it. “Last year we had a larger CAD at $ 88.2 billion. Nevertheless, we were able to fully and safely finance the CAD, and do even better. We added $ 3.8 billion to the reserves. We contained the CAD at 4.8 per cent of the GDP”, the Minister said.

With regards the current fiscal, the Finance Minister hoped there would be small accretion to foreign exchange reserves. The RBI has already taken host of steps to increase interest rates at the short-end and this has contained the depreciation of rupee to some extent, he added.

Mr. Chidambaram said on account of various global and domestic factors, Rupee slipped to all-time low of 61.8 to a Dollar earlier this month.

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