Steps On Anvil To Reduce Gold, Non-essential Goods Imports: FM

New Delhi, Aug 13, IRNA – India’s Finance Minister P Chidambaram Monday said government will reduce import of gold, silver, oil and non-essential goods to restrict Current Account Deficit (CAD) to 3.7 per cent of GDP in the current fiscal. Besides, he told Lok Sabha, government will also permit public sector financial institutions and oil companies to raise funds abroad and liberalize norms for non-resident deposit schemes to increase capital inflows into the country. Amid din and uproar in the House over various issues including Telangana, the Minister said, notifications in respect of tariff rates will be laid before Parliament in the usual course. He said that with the fresh measures, CAD will be contained at USD 70 billion, while the inflows will increase to a level that will be sufficient to finance the CAD. If the CAD is contained at USD 70 billion, it will amount to 3.7 per cent of the GDP (as against 4.8 per cent in 2012-13), he said in a statement. Stressing that like the global economy, Indian economy too is facing challenges, the Minister said, We believe that we have to do more to contain CAD, to reduce volatility in the currency market and to stabilize the rupee. In order to increase capital inflows, Chidambaram said public sector financial institutions would be allowed to raise quasi-sovereign bonds to finance long-term infrastructure needs. Besides, he said, PSU oil companies would be allowed to raise additional funds through External Commercial Borrowings (ECBs) and trade finance. The government, he said, would also liberalize ECB guidelines as well as non-resident (NRE/FCNR) deposit schemes. These measures, Chidambaram said, were being taken after extensive consultations with the ministries of Commerce and Industry, Petroleum and Natural Gas and Reserve Bank of India. We have the Ministry of Commerce's estimates of exports and imports and of trade gap. Based on these consultations, we have estimated the CAD for the current year and have decided on certain measures that would ensure that the CAD will be fully and safely financed in the current year, he said. Noting that one of the main challenges facing the economy is the CAD, Chidambaram said that in 2011-12 the government had to draw reserves of USD 12.8 billion to finance it. Last year we had a larger CAD at USD 88.2 billion. Nevertheless, we were able to fully and safely finance the CAD, and do even better. We added USD 3.8 billion to the reserves. We contained the CAD at 4.8 per cent of the GDP, the Minister said. As regards the current fiscal, Chidambaram hoped there would be small accretion to foreign exchange reserves. The RBI, the Minister said, has already taken host of steps to increase interest rates at the short-end and this has contained the depreciation of rupee to some extent. On account of various global and domestic factors, rupee slipped to all-time low of 61.8 to a dollar earlier this month./end