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Govt, RBI to take more steps to contain CAD

The CAD, which is the difference between inflow and outflow of foreign currency, "widened from 5.4 per cent in Q2 (July-September) to a record high of 6.7 per cent of GDP in Q3, driven mainly by large trade deficit," as per data released by RBI.

BT Online Bureau | March 28, 2013 | Updated 19:37 IST

The Finance Ministry said it was not surprised by the "large" Current Account Deficit of of 6.7 per cent of GDP in December quarter and the government and Reserve Bank of India will take additional steps to contain it.

"The number (6.7 per cent) is large though not surprising ... Both RBI and the government will continue to monitor the CAD and will take additional steps whenever warranted," the Finance Ministry said in a statement.

The CAD, which is the difference between inflow and outflow of foreign currency, "widened from 5.4 per cent in Q2 (July-September) to a record high of 6.7 per cent of GDP in Q3, driven mainly by large trade deficit," as per data released by RBI.

The Finance Ministry said government has "taken steps to increase government and household savings, as well as facilitate FDI and FII investments".

During April-December 2012, CAD stood at $71.7 billion accounting for 5.4 per cent of GDP as against $56.5 billion (4.1 per cent of GDP) in the same period of 2011.

Noting that the CAD is large, the statement said "it is a matter of satisfaction that it has been financed without drawing upon the foreign exchange reserve.

"Going forward, we hope to be able to finance the CAD through sufficient foreign inflows."

It hoped that with improvement in exports, the deficit would moderate in coming months.

"CAD for fourth quarter is expected to be smaller. Govt is committed to bringing down the CAD over the time, as well as ensuring that it financed safely," it added.

The government has already imposed curbs on import of gold by increasing duty with a view to contain ballooning CAD.

Besides, it has taken steps to improve availability of gold.

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