It was a shock with a touch of gold as the current account deficit, spooked by higher gold imports, widened by $17.8 billion. The government was sure that the declining trade deficit for three consecutive months would continue, but its hopes were dashed.
Despite the fall in crude and gold prices globally, the import bill was up on these two counts. Gold imports, despite the government’s efforts to curb imports, were at $7.5 billion. Exports grew at a weak 1.7 per cent while imports zoomed 11 per cent. What is curious is the three per cent rise in the oil import bill despite crude prices falling and a slowdown in economic growth. On the other hand, imports could have increased because of the extreme shortage of gas with the KG Basin D6 field cutting production drastically.
Whatever the reason, the government needs to take measures to keep the oil import bill on a tight leash. It needs to show more urgency in boosting development of non-conventional energies, as countries like Germany have done. It can also scout for cheaper oil and gas sources.
Most market-watchers feel the spike in gold purchases could have been for the festive season and may taper off in the future. The widening current account deficit, however, remains a serious concern, especially since the finance minister has given assurances during road shows abroad to bring down the CAD.