India’s current account deficit (CAD) is likely to be around 2 per cent of GDP in the coming few years due to slackening of gold imports, Prime Minister’s Economic Advisory Council Chairman C Rangarajan today said.

“With inflation showing signs of decline and gold prices also not rising, the attraction of gold as an asset is coming down. And as we go ahead, we should find the demand for gold falling. There are also other factors contributing to improvement in exports.

“Therefore, I expect the current account deficit to remain around two per cent of the GDP over the years,” Rangarajan told reporters here on the sidelines of a programme organised by the Centre for Economic and Social Studies.

Finance Minister P Chidambaram has recently said that CAD was brought down significantly to $32 billion in 2013-14 against $88 billion during 2012-13 and fiscal deficit contained within the target during last fiscal.

In 2012-13, CAD was at 4.7 per cent of GDP and in 2013-14, it will be only 1.7 per cent, the Finance Minister had said.

Replying to a query, he said administrative restrictions that were imposed on gold import may be relaxed as the prices of the yellow metal are stabilised.

“I think the restrictions that have been imposed administratively will be relaxed. I think the import of gold will come down because of the natural factors like inflation coming down, and gold prices not rising and the attraction of gold as an asset will come down. That’s what reflects in the reduction of gold import,” he said.

Gold, silver imports

Gold and silver imports contracted by 40 per cent to $33.46 billion in 2013-14 or just seven per cent of the total import bill, against 11 per cent in the earlier fiscal, after the government put in place steps to check their runaway imports.

On the reported likely El Nino effect on the country’s GDP, Rangarajan said: “We do not know what the ultimate impact will be. Sometimes these forecasts also will go wrong. So we will have to wait and see.’’

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