India’s current account deficit (CAD) widened to $10.1 billion in the second fiscal quarter of this year, the Reserve Bank of India said, with the surge in gold imports cited as a contributing factor.
India’s CAD increased from $7.8 billion in the first quarter of the fiscal year and from $5.2 billion in the same period in 2013,”primarily on account of higher trade deficit contributed by both a deceleration in export growth and increase in imports”, the RBI said on Monday.
On a balance of payments basis, merchandise imports increased 8.1 percent in the second fiscal quarter, having declined 4.8 percent in the same period in 2013, largely due to a sharp rise in gold imports, it added.
Oil is India’s largest import item in value terms, followed by gold – the two commodities account for around 45 percent of all of the country’s imports.
It attributed the rise to the large volumes of gold imported into the country, which the government aimed to tackle in 2013 by introducing various import restrictions.
In September, imports totalled 120-130 tonnes, compared with 71 tonnes in August and 48 tonnes in July, when importers stepped up their efforts to meet the typical increase in demand from the Hindu festival season.
Towards the end of November, the RBI surprised markets by abolishing the rule that made it mandatory to export 20 percent of all imported gold, known as the ’80:20′ rule, which was introduced in 2013 to tackle the ballooning CAD alongside an increase in import duties to 10 percent.
A member of the RBI has since indicated that the recent crash in oil prices to multi-year lows has made the country “better placed” on its CAD.
(Editing by Mark Shaw)
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