Tight rein on gold imports alone may fail to moderate India's CAD woes

MUMBAI (Scrap Monster) : The Export-Import Bank of India (Exim Bank) yesterday called for urgent need of alternate measures other than gold import curbs in order to tone down the country’s hefty current account deficit (CAD) situation.

According to TCA Ranganathan, the Chairman and Managing Director of the bank, along with strict restrictions on imports of goods like gold, the government should also concentrate on steps to improve the manufacturing and exports of high-tech capital goods. Surprisingly, India’s imports of such goods are at a staggering $90 billion. Even today India’s share of world exports is a modest 1.5-1.6%. The export base has to be diversified by systematically studying markets which India could exploit for exports.

Recently, the country’s central bank issued notification instructing all nominated banks and agencies to ensure that 20% of the gold imports in any form be exclusively made available for the purpose of export. This would indubitably boost gold exports and thereby aid the country’s efforts to rein in CAD.

The demand growth during the upcoming festive season may force the government and the RBI to announce more measures to cut back gold imports.Along with making gold imports tighter, the manufacturing exports from the country should be heightened. India’s presence in the world export market is still very low. Hence, an urgent thrust on manufacturing and high technology capital goods is a must if India is to reduce its hefty fiscal gap. Meantime, Exim Bank also believes that India cannot live without gold imports since it is not being produced in the country.