INDORE, India -- After CAD numbers came out to be bigger than previous levels, hinting some danger on Indian currency, Finance Minister Arun Jaitley is of the opinion that there’s no reason to worry as the country stands at enough amount of forex reserves currently.
Finance Minister in his statement said that CAD numbers are more or less under control at the end of Q2 of current fiscal year. Statement came as response to a question asked to him in Rajya Sabha.
Previously, Current Account Deficit for India came down to a level of 1.7% in FY 2014 from 4.7% of GDP in FY 2013. This happened after the regulations caused imports to fall sharply, especially gold whereas export levels remained moderately high.
Previously in current fiscal year, in Q2 itself, the restrictions on gold imports were eased. CAD then, at the end of July-September quarter rose to 2.1%of GDP compared to 1.7% of GDP in first quarter.
Tepid growth in exports along with increased imports, especially of gold during festival season has led to this widening of CAD gap.
Indian Finance Minister Arun Jaitley’s confidence that Current Account Deficit Gap in more or less under control was derived from Forex reserves of the country. Evidently, through last few quarters, India has enjoyed larger number of net foreign inflows by means of equity investment and bond buying. Larger foreign reserves will lay off some pressure from Indian currency, which it may face due to widened CAD gap.
In answer to a question asked about gold imports, Finance Minister said that too many regulations on gold imports may cause to increase illegal means of gold imports. The same was the reason quoted by the RBI when it suddenly decided to withdraw its 80:20 regulations on gold imports. The rule mandated export of 20% of total gold imported by any entity in India.
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