India can afford gold import of $30 bn a year: Rangarajan

A major reason for high current account deficit in the last fiscal was high imports of gold

Prime Minister's Economic Advisory Council chief C Rangarajan today said India can tolerate $30 billion worth of gold imports.

 

A major reason for high current account deficit (CAD) in the last fiscal was high imports of gold.

 

"As inflation comes down and as financial assets become more attractive, perhaps this part of demand for gold can come down and we can probably tolerate $30 billion worth of import of gold," Rangarajan said at the Delhi Economic Conclave.

 

Earlier inaugurating the conclave, Finance Minister P Chidambaram said India can neither finance a CAD of the order of $88 billion as it did in 2012-13 nor can afford to pay for import of gold in the order of $50 billion or more.

 

The CAD touched a lifetime high of $88.2 billion in 2012-13 mainly due to high gold imports (845 tonnes) and firm crude oil prices. Higher CAD also led to the battering of rupee which plunged to all time low of 68.85 in August-end.

 

The government as well as Reserve Bank took a slew of measures to curb gold imports. The measures showed results as in-bound shipment fell significantly.

 

As per the latest data, the gold and silver imports declined 80.55% to $1.05 billion in November year-on-year. The imports had totalled $5.4 billion in November, 2012.

 

Meanwhile at a panel discussion at the conclave, RBI Governor Raghuram Rajan said that some part of reduction in current account deficit is coming from suppressing gold imports.

 

"This was necessary in short run but it is not desirable over the medium term," he added.