Current account deficit widened but comfortable: RBI

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SME Times News Bureau | 12 Dec, 2014
Though country's current account deficit (CAD) widened to $10.1 billion during July-September, the Reserve Bank of India (RBI) is comfortable with the development although there are risks, its governor Raghuram Rajan said Thursday in Kolkata.

"The CAD has widened definitely. But, it is in the comfortable direction and will be watching carefully. But there are risks to the current account," he said the RBI Central Board meeting in Kolkata.

CAD is the net difference between inflows and outflows of foreign currencies.

"There are risks to the current account. But we are not apprehensive in any way," Rajan said.

RBI Monday had stated that the CAD has widened to 2.1 percent of gross domestic product on account of the rising gold prices in the second quarter of the current fiscal. The CAD is higher than both the previous quarter and the year before.

Gold imports surged 8.1 percent, while merchandise exports growth dipped 4.9 percent in the reporting quarter primarily due to the relaxations on its import.

"It is hard to maintain the restrictions on gold imports for a long time. We need to relax them," he said.

The central government had relaxed the gold import norms in May this year and six private trading companies were permitted to import the yellow metal. With oil prices normalising, Rajan said there would be some kind of cushion going forward.

"But it is difficult to rely on these price movements and it is uncertain. We are not certain what is going to happen later," he said.

The RBI governor also said that the apex bank is in discussions with the central government to review the lending norms for the priority sector.