Gold import fall will help current account deficit: Ministry

New Delhi  :  With a major decline in gold imports, the finance ministry Tuesday said it expected the current account deficit (CAD) in 2013-14 would decline to $70 billion from 88.2 billion in the last fiscal.

“We are confident that we shall be able to contain CAD at $70 billion as well as get additional capital flows to finance it fully without any recourse to draw down of reserves in this year,” Department of Economic Affairs Secretary Arvind Mayaram told media persons here.

Gold imports, which totalled 335.1 tonnes in the April-June quarter, have declined to 58.37 tonnes in the second quarter (up to September 25).

“This indicates a very sharp compression in the gold imports in Q2 onwards and we expect this trend to continue,” Mayaram said.

The government expects the gold import to come down to 800 tonnes this fiscal, as against 845 tonnes in 2012-13.

According to the Reserve Bank of India’s Balance of Payment (BoP) data for the first quarter of 2013-14, the current account deficit (CAD or the difference between inflow and outflow of foreign exchange) is at $21.8 billion (4.9 percent of the gross domestic product).

The elevated level of CAD for the quarter was mainly due to gold imports which stood at $16.5 billion.

Higher gold imports and slowdown in overall exports were the main factors for the CAD rising to a record high of 4.8 percent of the GDP in the last fiscal.

Exports in August grew in double digits, while overall merchandise imports slowed, Mayaram said.

“Trade deficit narrowed in August to a five-month low of $10.9 billion. Thus, CAD will be contained at $70 billion. Already, many institutional analysts have revised their BoP outlook on CAD and capital flows,” he said.

“With the measures announced by the finance minister on Aug 12, 2013, to compress gold, it is estimated that gold imports could be restricted to about 800 tonnes and substantial gains could accrue in the next nine months,” Mayaram added.