BJP will follow UPA footsteps to control CAD, says Jaitley

The BJP government will continue with the steps taken by the previous UPA regime to control the swelling current account deficit (CAD), keeping a firm handle on import of gold is one of them.

After keeping the import duty on gold and silver unchanged at 10 per cent in his maiden budget last week, Finance Minister Arun Jaitley on Tuesday said efforts were being made to continue each of the steps taken earlier to contain CAD.

“Each step is being continued,” Jaitley said in Rajya Sabha in reply to questions. He said the measures taken by the government and the RBI helped contain CAD to $32.4 billion in 2013-14 and also build a foreign exchange reserve of $316.4 billion as on July 4,” Jaitley said.

Jaitley’s remark comes after a surge in trade deficit in June this year boosted by a 65 per cent increase in gold imports in a single month. The finance minister said, the restrictions on gold import "apparently seems to have worked".

The UPA had taken steps such as hike in the customs duty on gold to 10 per cent and imposed physical restrictions by making imports linked to exports. This norm known as 80/20 rule was enforced in July last year making it mandatory to export a fifth of all gold imports.

The government and Reserve Bank of India together also took some measures to check other non-essential imports. The bullion import was curbed at a record level and India was relegated to the second position after China in consumption of gold after these steps. Foreign exchange reserves too shore up but smuggling of gold rose manifold. 

Import curbs relaxation

Closer to general elections in May, the demand for removing gold import curbs flared up again. The BJP had then spoken against the gold import restrictions during its election campaign. Its prime ministerial candidate Narendra Modi had said “any action on gold should look at the interests of the public and traders, not just economics and policy”.

He also said that the government and the RBI did not estimate or target specific levels of CAD, but sought to monitor the balance of payments developments closely and calibrate policies and steps to meet the broad objectives of moderating CAD to sustainable levels.