CAD may widen if oil prices continue to rise: Jaitley

India's current account deficit is likely to be impacted this fiscal if global crude oil prices continue to rise and more foreign exchange is spent on procuring them, Finance Minister Arun Jaitley said Saturday, an admission which may not elate equity ma

India's current account deficit is likely to be impacted this fiscal if global crude oil prices continue to rise and more foreign exchange is spent on procuring them, Finance Minister Arun Jaitley said on Saturday, an admission which may not elate equity markets already under pressure.

A high CAD means the economy import more than it exports and hence puts pressure on the rupee.

“The CAD is linked to the global oil prices. India's foreign exchange spends are mostly done in buying crude oil. If oil remains at a high, there is going to be an adverse impact,” Jaitley said at the Hindustan Times Leadership Summit here.

He, however, said that the government was planning to take more steps in the coming days to bolster the rupee and narrow CAD.

According to the official data, India's CAD as a percentage of GDP declined to 2.4% in the April-June quarter of 2018-19 against 2.5% in the year-ago period.

The Centre last week had liberalised foreign borrowings for oil companies to raise up to $10 billion to arrest the slide of the rupee and contain CAD.

Prior to that, the government had raised customs duty on as many as 19 “non-essential” imports to save the outflow of foreign exchange which is currently a little below $400 billion and enough only to cover 10 months of imports.

Jaitley also reiterated his commitment to maintain fiscal deficit at 3.3% of the GDP ahead of parliamentary elections in 2019.

To this end, he said, the government has given a signal by reducing its market borrowing by Rs70,000 crore in the second half of the current fiscal so that private players have enough space to do business.

 

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CAD may widen if oil prices continue to rise: Jaitley

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