Prime Minister Manmohan Singh exuded confidence that the current account deficit (CAD) will decline in the current financial year and said the government and the Reserve Bank of India (RBI) will use all policy instruments to lower it.
The prime minister said the government will strive to bring down the deficit to the ideal level of 2.5 per cent of GDP.
CAD hit a record high of 4.7 per cent in 2012-13 as rising oil and gold imports widened the trade gap. The deficit is logged when total imports of goods, services and transfers are greater than exports.
"We are committed to bringing the CAD under control by addressing both the demand side and the supply side of the problem. On the demand side, we need to reduce the demand for gold and the demand for petroleum products the two biggest components of our trade deficit," Singh said.
Allaying fears of the industry at Assocham's annual general meeting, the prime minister said: "We will use all policy instruments available, fiscal, monetary and supply side interventions, to ensure that the CAD declines further over time... It is not possible to do this in one year, but I expect that the CAD in 2013-14 will be much lower than the 4.7 per cent level recorded last year. It will decline further next year."
While highlighting measures taken by the government to control gold demand, the prime minister said the efforts were showing results and the government was now working to push exports.
Gold imports in June are estimated to have fallen to around 31 tonnes, down from 162 tonnes in May and 141 tonnes in April.
"Gold imports declined sharply in June and I hope they will stay at normal levels from now on," Singh said.
The prime minister also said that fiscal deficit mounted on account of stimulus packages given in the past, adding the government has set a target to contain it to 4.8 per cent of GDP in FY14 and reduce it further to 3 per cent by FY17. "We are determined to meet the target for this year."
With inputs from PTI