Continuing his road shows to attract foreign direct investment, Union Finance Minister P. Chidambaram left on Friday on a weeklong tour of Canada and the U.S. to showcase India’s growth story to investors and participate in the World Bank/IMF spring meetings in Washington. During his tour — after visiting global financial hubs such as Hong Kong, Singapore, Frankfurt and London in January and Tokyo earlier this month — Mr. Chidambaram is expected to highlight the recent reform measures taken by the government to speed up large projects, as also the steps to bring the fiscal deficit down, thus projecting India as a safe long-term investment destination.
As for the widening current account deficit (CAD), a far greater worry for the government, it is a matter of coincidence that gold prices are plunging. As gold has lost its sheen in the past few days and is expected to decline further on the Cyprus sell-off fears and the Euro zone debt worries, the development, considered a blessing in disguise, is expected to wean idle investment off gold and channel it into more productive bank deposits and the equity market.
If gold prices go down further and import of the yellow metal dips, a major cause of the burgeoning CAD is expected to blow over automatically. Besides, the government is expected to launch the inflation-indexed bonds shortly to address the basic problem of negative real rate of return and the consequent switch to gold investments.
