Some more steps on the anvil to narrow CAD, says Jaitley

Asserting that the government is determined to meet the fiscal deficit target, Finance Minister Arun Jaitley Saturday said some more steps are on the anvil to narrow the current account deficit (CAD) and bolster forex inflows.

Speaking at the HT Leadership Summit here, he said India will continue to be the leading destination of foreign direct investment despite the adverse global situation.

However, he said, there could be some transient problem in foreign portfolio investment but these would not continue depending on the global situation.

The finance minister said maintaining fiscal prudence is one of the top priorities of this government.

"One of the top priorities was and I do believe in that maintaining fiscal prudence always helps and you can afford to take liberties only when fiscal position is strong and not otherwise," he said.

"Gradually on fiscal deficit we had glide down from 4.6 per cent we are now targeting 3.3 per cent (of GDP) this year and I am quite certain with the kind of revenue coming particulary from the direct taxes, we will achieve that," he said.

As far as current account deficit (CAD) is concerned, Jaitley said it is linked to global oil prices because forex is mostly spent on crude.

"The way the (crude oil) prices are going up, the highest in the last 4 years, it is going to be some adverse impact on the CAD. Now we are trying our best to take measures to narrow it.

"Some more steps are likely but there are two factors... external one is the oil prices and second is the policy with the United States which is leading to hardening of the dollar itself therefore adversely impacting all currencies of the world," he said.

He, however, did not disclose steps to be taken by the government for narrowing CAD.

Citing some of the steps to bridge CAD and bolster flows in the recent past, Jaitley said the sovereign borrowing target was reduced by Rs 70,000 crore for the current fiscal and withholding tax on masala bonds has been withdrawn for the moment.

Besides, he said, the government recently allowed public sector oil marketing companies to raise USD 10 billion through external commercial borrowing (ECB).

On Indian economy, he said, the ability of the country to maintain the present growth rate for a decade or two is reasonably certain.