Within days of hike in import duty on gold, Chief Economic Advisor Raghuram Rajan on Monday said the government could take more steps to curb demand for the precious metal amidst widening current account deficit.
“We have taken number of measures to curb the import of gold. The government will never say it’s the end of it,” Mr. Rajan told reporters on sidelines of a workshop here.
Last week the government increased import duty on gold to 8 per cent, the second such hike within six months. The monthly gold imports have averaged 152 tonnes in first two months of the fiscal as compared to an average of 70 tonnes seen in the 2012-13 financial year.
High gold imports is one of main reasons behind high CAD, which touched a record high of 6.7 per cent of GDP in December quarter of last fiscal. The CAD is likely to be in the range of 5 per cent for the 2012-13 fiscal. As per experts a CAD of 2.5 per cent is sustainable.
The high CAD in turn affects rupee value. In early trade, the rupee hit a life-time low of 57.54 against the US dollar.
Mr. Rajan said India has a large CAD, and currencies of emerging markets with large CAD have depreciated more.
“We are undergoing period of volatility (in rupee)... Obviously in the government, we don’t like to see volatility... This could be temporary phenomenon,” he said.
Mr. Rajan, however, said the government does not have in mind any specific level at which the rupee should be.
The chief economic advisor in the Finance Ministry also said the medium term measures taken by the government in past will continue and help rupee to find a level consistent with the sustainable growth.