The only way to contain the rising current account deficit (CAD) of the country is to increase the domestic production of oil and coal and restraining the consumption of gold, finance minister P Chidambaram said today.
Addressing a meeting of the parliamentary consultative committee attached to his ministry, the finance minister said that in order to increase fuel production, India should get its policies and priorities right as long-term measures.
Chidambaram's comments come after the commerce ministry today reported that the country imported crude oil valued at over $15 billion and precious metals (gold and silver) valued at another $5 billion in May. Together, the two account for the $21 billion trade deficit of the country for May 2013.
Speaking on the subject 'The Current Account Deficit - Implications and Measures to Contain the Deficit,' Chidambaram said the extent of CAD and its financing are the two major concerns. He said it is important to finance CAD than to draw from the reserves.
The minister said that the major reason for the country's large CAD is the huge dependence on import of certain items like oil, coal and gold.
Along with this, the global recession makes the Indian economy incapable of doing much on the external front, he pointed out.
All of Europe except Germany is in recession and so is the case with Japan and other developing economies. Only US economy is showing some signs of revival. India, on the other hand, continues to remain a desired destination for FDI and FII, he added.
Chidambaram said the government is looking at FDI caps to see if they are indeed serving the purpose. Otherwise the caps could be revisited, he added. Chidambaram said despite all odds, the government was able to finance the CAD and also added around $3 billion to the forex reserves in 2012-13. He expressed confidence that this year also, CAD will be financed without dipping into reserves.
He further said that government is proactively working towards operationalisation of 215 stalled projects involving about Rs7,00,000 crore, with a view to give a push to the production activity in the country.