Despite an increase in the current account deficit (CAD) in the second quarter of the current fiscal, Finance Minister Arun Jaitley today said there is no cause for concern as forex reserves are comfortable.
“In the first six months, the CAD is moderately under control,” Jaitley said in Rajya Sabha during Question Hour. India’s CAD narrowed down from 4.7 percent in 2012-13 to 1.7 percent 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 was brought under control in 2013-14 after government imposed restrictions on import of gold. Following, this in 2014, certain restrictions were withdrawn. CAD, in the July-September quarter, however, rose to 2.1 percent of GDP, from 1.7 percent in first quarter.
The CAD increased on account of higher trade deficit contributed by deceleration in export growth and increase in imports. Jaitley said with country’s forex reserve was comfortable and the Balance of payments under control, there was no cause for concern on the CAD front. The current account deficit is the net difference between inflows and outflows of foreign currencies.
With continued improvement in the outcome and outlook for CAD for the year, aided by softening of international prices of crude petroleum, government made the diesel prices market- determined with effect from October 19. To a question on gold imports, Jaitley said, “If you put in too many restrictions, then the official gold import will come down and unofficial imports will go up.” 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. To a separate question, he said the Reserve Bank has not received any proposal demanding alternative payment model from radio taxi industry.
“RBI is not contemplating issuance of any circular as alternative authorised payment systems already exists in the country. These payment systems are authorised under Payment and Settlement Systems Act 2007,” he said.