Finance Minister P. Chidambaram is quite hopeful that India’s gold imports this year will be reined in at a level well below last year’s total imports of 845 tonnes.

The reduced gold imports will help save a considerable amount of foreign exchange, which will have a positive impact on the current account deficit (CAD), Chidambaram told a press conference, on the eve of his completion of one year in office as Finance Minister.

Following strong measures from both the Government and the Reserve Bank of India, India’s gold imports contracted to 31 tonnes in June. Up to July 25, it was 45 tonnes, Chidambaram said.

Gold imports were 141 tonnes in April and rose to 162 tonnes in May.

This spurt in gold imports early this fiscal put pressure on policymakers as it further worsened the CAD situation, adding more pressure on the rupee.

Besides a hike in import duty on gold, the consignment route for gold imports by banks was also closed to curtail gold imports.

Twin deficits

Chidambaram promised that the Government would this year too tackle both deficits (fiscal deficit and current account deficit).

“The target for fiscal deficit is 4.8 per cent: it is a red line and it will not be breached,” he said.

As far as CAD is concerned, Chidambaram expressed confidence that this year too the Government would be able to fully finance it and not be forced to draw down on the reserves.

CAD was a problem in 2012-13 as well, but the Government not only fully and safely financed the deficit of $88 billion, but also added $3.8 billion to the reserves, Chidambaram said.

The story was, however, quite different in 2011-12, when the drawdown from the reserves was $12.8 billion to fund the CAD.

srivats.kr@thehindu.co.in

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