Within days of hiking import duty on gold, chief economic advisor Mr. Raghuram Rajan on recently said central government could take more steps to curb demand for the precious metal amidst widening current account deficit (CAD).
“We have taken number of measures to curb the import of gold. The government will never say its end of it“Mr. Raghuram Rajan said .
Last week, the Union government increased import duty on gold to 8%, the second such hike within 6 months.
The monthly gold imports have averaged 152 tonnes in first 2 months of the financial year (2013-14), compared with an average of 70 tonnes seen in the financial year 2012-13.
High gold imports is one of main reasons behind high CAD, which touched a record high of 6.7% of GDP (Gross Domestic Production) in December quarter of last financial year.
The CAD is likely to be in the range of 5% for the financial year 2012-13. As per experts, a CAD of 2.5% is sustainable. The high CAD in turn affects Indian rupee value.
Mr. Raghuram Rajan further said India has a large CAD, and currencies of emerging markets with large CAD have depreciated more.
“We are undergoing period of volatility (in rupee)... Obviously in the cnetral government, we do not like to see volatility... This could be a temporary phenomenon,“ Mr. Raghuram Rajan said.
He, however, said the central government does not have in mind any specific level at which the rupee should be. The chief economic advisor in the finance ministry Mr. Raghuram Rajan also said the medium term measures taken by the central government in past will continue and help rupee to find a level consistent with the sustainable growth.
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