Gold imports at 20 tonne/month; hints at insurance, retail cheer.
As if to make investors and industry alike smile ahead of Diwali, finance minister (FM) P Chidambaram on Friday announced that the current account deficit (CAD) will be contained at $60 billion or Rs3.7 lakh crore this fiscal, much lower than the previous projection of $70 billion or Rs4.43 lakh crore.
“Last year, it was $88 billion,” a smiling finance minister said. Lower CAD, he said, “would be a significant achievement”.
He said he expects Parliament to approve legislation lifting the cap on FDI in insurance from 26% to to 49% in its next session that will end in December.
He said he was hopeful that one or two foreign chains may enter the supermarket sector, part of government’s moves to revive FDI.
The FM’s announcement came a day after September core sector data showed over 8% growth, the highest level in the last 11 months.
He attributed the lower CAD estimate to “signs of green shoots in the economy”. “Exports have been very good in recent months. Gold imports have also come down,” he said. He expects momentum that was seen in exports to continue until the end of March.
The CAD stood at $21.8 billion in the April-June or first quarter of this fiscal, compared with $18.1 billion in the previous quarter.
The government has taken tough measures to control gold imports which have the second highest value after oil on the country’s import list.
For instance, the government had increased import duty thrice in 2013 to 10%.
Interestingly, the Reserve Bank of India (RBI) guidelines on CAD released a month ago were quite pessimistic. Some 335 tonnes of gold was imported in the first quarter. In value terms, they were $7.3 billion higher than the previous quarter. He said gold imports in October rose to 23.5 tonne from 11.16 tonne in September. The finance minister said he hoped the import of gold would remain at a level of about 20 tonnes a month.
With the Sensex ending the week at a lifetime closing high of 21293.88 on Friday, and amid signs that foreign investors are bullish again on Indian stocks, Chidambaram cautioned investors against blindly investing in stocks in an environment of volatile markets.
On the foreign direct investment or FDI front, Chidambaram said post liberalisation in August, there have been investments worth $13 billion.
Chidambaram said growth in bank credit was robust. While credit to industry grew 17.8%, credit to services, the priority sectors, personal loans and agriculture, grew by 18.4%, 16.6%, 17.8% and 12.1% respectively. The gross bank credit grew by 16.8%.
The FM advised the industry to start investing in the Indian economy to utilise the green shoots in the economy. “Indian industry should not sit on idle cash now… The way to multiply the gains of green shoots is by investing,” said Chidambaram.
(With agency inputs)
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