With gold imports coming down, the Finance Minister, P. Chidambaram, has claimed that the current account deficit will be below $70 billion.
His remarks came two days after the Reserve Bank of India gave the first quarter (April-June) number as $21.8 billion. This is 4.9 per cent of GDP. Though this is higher than the 4 per cent registered during the first quarter of 2011-12, it is much less than the market estimates.
“The first quarter the total quantity of gold imported was, I think, 345 tonnes. In the second quarter, up to September 25 it is only about 63 or 64 tonnes. So there is a sharp compression in gold imports. So if you net out gold imports we'll find that CAD is a very manageable number,” he said while talking to a group of visiting reporters here after the Platinum Jubiliee celebration of Jammu & Kashmir Bank.
He said that he was reasonably confident from the beginning, when a red line was drawn. The Finance Minister earlier had announced target of $70 billion or 3.7 per cent of GDP for 2013-14. “We will remain below $70 billion and the numbers that we have for the second quarter are any indication, I think we will be comfortably below $70 billion. At the moment I will stick to $70 billion. When second quarter numbers are announced, then I will give a better number,” he added.
In the meantime, the other deficit, fiscal deficit has exhausted nearly two-thirds of the budget target in the first five months of the current fiscal.. The Government set a target of 5.42 lakh crore or 4.8 per cent of GDP as fiscal deficit. However, Chidambaram is confident that it will not breach the target.
“The 74.6 per cent number is irrelevant. We frontloaded our planned expenditure. The planned expenditure is running at around 4-5 per cent ahead of last year. We deliberately frontloaded it. Now we are planning a compression in the non-Planned expenditure. All this will play out over the year. We don’t look at it like a still photograph. Things will even out over the year and I am confident we will remain below the red line of 4.8 per cent,” he said.
Asked about the rupee, the Minister said that his reported remark about 59-60 against a dollar was not something like pulling out of a hat. It was based on Real Effective Exchange Rate (REER) which is published by the RBI. According to him, the exporters have told him that even at 60, exports are competitive.
“The rupee is hovering between 62 and 63 now. It means that there is still some speculation in the rupee. All genuine demand for the dollar is being met. All those who earn in dollars and foreign currency should bring it back to India as early as possible. I think if the inflows pick up, they have picked up in the last 3 weeks, it is possible that the rupee will move towards 60,” he said.