The government today exuded confidence that Current Account Deficit remains broadly under control despite an increase during the last quarter, even as opposition Congress countered this saying it is not a very happy situation for the economy.
A day after RBI data showed CAD rising to 2.1 per cent of GDP in second quarter from 1.7 per cent in the first quarter, Finance Minister Arun Jaitley told Rajya Sabha that there is no cause for concern with comfortable forex reserves position.
Hoping that a 2013-like situation does not arise, he said the government will consider tightening measures only in extreme case as the effect of over-regulation in areas like gold could push the yellow metal into the grey market.
“In the first six months of this year, the CAD is broadly under control,” Jaitley said in Rajya Sabha during Question Hour.
India’s CAD narrowed down from 4.7 per cent in 2012-13 to 1.7 per cent in 2013-14 due to a lower trade deficit as a result of modest recovery in exports and a sharp fall in imports, particularly gold imports.
The CAD in second quarter this fiscal increased on account of higher trade deficit contributed by deceleration in export growth and increase in imports.
“…Since the foreign exchange reserve position in the country is reasonably comfortable, and the Balance of Payments is also broadly under control, I don’t think there is any reason for concern, or, to take the kind of steps which we had to take in 2013 or 2014,” Jaitley said.
The current account deficit is the net difference between inflows and outflows of foreign currencies.
Joining the debate, Congress leader Anand Sharma said that the CAD growing to 2.1 per cent, despite fall in global crude prices, “is not very much a happy situation, as the Finance Minister is saying”.
He said there was a concern that the crude import bill has drastically come down, but the country’s import bill has gone up and exports are falling.
CAD was brought under control in 2013-14 after government imposed restrictions on import of gold. Following, this in 2014, certain restrictions were withdrawn.
“…If you put too many restrictions on gold, then the official entry of the gold through the normal channels goes down, but through the unofficial smuggling channels it goes up. So, the moment the position became more comfortable, the position was liberalised,” Jaitley said.
“We are keeping a close eye on it and, at the moment, the situation is broadly under control. If some steps are required, it is only at that stage that we will consider the steps,” he added.
To another question, Jaitley said till November 27 of the current fiscal, Foreign Institutional Investors and Foreign Portfolio Investors have made Rs 1,84,757 crore net investments in the country.
During the first six months, investments made by FIIs and FPIs stood at Rs 1,44,053 crore of which Rs 82,810 crore came in the form of debt and the remaining in equity.