CAD to remain at 2% of GDP, says Rangarajan

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The current account deficit, an indicator of the country’s overgrowing imports when compared with the exports, is likely to remain at two per cent of the dross domestic product, according to C Rangarajan, chairman of the prime minister’s economic advisory council.

“Two per cent of the GDP is the likely level at which the CAD will settle down. The short rise in CAD was mainly because of the extraordinarily large gold import and the gold prices were not rising too. But now, the attraction of gold as an asset is coming down and there fore as we go ahead the demand for gold will come down, along with other contributing factors,” he said.

The CAD in 2012 -13 stood at $ 88 billion, at 4.7 per cent of GDP. Where as, it had come down to $32 billion in 2013-14 at 1.7 per cent of the GDP. In the interim budget, the government had projected it to be at $35 billion toward March end.

“The restrictions that have been imposed by the administration will not remain. As it is, the duty on gold is not as high as the duty on other luxury products. The inflation is coming down, and gold prices going up among other factors will bring down the gold imports,” he said.

On the other hand, talking about the El- Nino effect, Rangarajan said, “We do not know what the ultimate impact will be. Sometimes these forecasts also will go wrong. So we will have to wait and see.” El Nino is the warming of oceans at the Pacific equator, which is likely to affect by either flood or droughts, bringing in disturbances in global food supply.

trushnaudgirkar

@mydigitalfc.com

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