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Confident of containing CAD below $60 billion: Chidambaram

New Delhi (PTI): Finance Minister P Chidambaram today exuded confidence that India’s current account deficit (CAD) will be contained below USD 60 billion this financial year as against an earlier estimate of USD 70 billion.

“We think we can peg it (CAD) at USD 60 billion or below. I am confident that we can do even slightly better than USD 60 billion,” he told CNBC Awaaz.

The CAD, the difference between the inflow and outflow of foreign exchange, had touched an all-time high of USD 88.2 billion, or 4.8 per cent of GDP, in the last fiscal.

The deficit for April-June was at USD 21.8 billion or 4.9 per cent of GDP.

High gold imports was one of the main reasons that pushed CAD to a record high in the previous financial year.

However, various curbs put in by both RBI and the Centre had helped in containing gold imports this fiscal.

On impact of the US Federal Reserve’s gradual stimulus withdrawal, Chidambaram said the tapering will happen, but both the markets as well as the government are prepared to deal with it.

“We now know it (tapering) will happen…it will happen perhaps in January or February, today they say it will happen in March…Market and government are now prepared for this, in the sense we know it will happen…

“Therefore, we need to strengthen the fundamentals of the economy, what the (RBI) Governor said bullet proof balance sheet, which means we will contain CAD, we will contain fiscal deficit, improve the revenues, contain expenditure, take steps to prevent excessive speculations on the currency…,” he said.

The Finance Minister further said number of measures are being taken so that when tapering happens, “markets won’t be taken by surprise, we won’t be taken by surprise and whatever impact it will be a minimal impact”.

Chidambaram said capital inflows are helping the economy. In the past 7-8 weeks, India added USD 9 billion to its foreign exchange reserves.

On the rupee, he said the domestic currency has traded between 61 and 62 to a dollar for several weeks now.

“We think that with more money coming in, the rupee should even go below 61…between 60 and 61 — that is a good sign,” the Finance Minister said.

The rupee ended at 61.62 against the dollar today, up 12 paise or 0.19 per cent. It touched an all-time low of 68.85 on August 28.

Terming inflation as a “problem,” Chidambaram said food items are driving price rises.

“What is driving inflation, some part is driven by grains, mostly by fruits and vegetables, milk, eggs. Food items are driving inflation. Onion on the top of list, over 300 per cent inflation,” he said.

He said there was very little that the central government could do to deal with vegetable, fruits, traders, wholesalers and retailers.

“State governments can do more. If I were the chief minister of a state, I know exactly how to use the Essential Commodities Act and deal firmly with those who hoarded onions,” he added.

Referring to gold, the minister said the steps taken to curb imports are correct and in the future, “people looking back will say this is one of the best decisions that we took in order to contain the CAD.”

He said the government will contain the fiscal deficit below the budgeted level of 4.8 per cent of GDP.

On the payment crisis at the National Spot Exchange (NSEL), Chidambaram said it will not spill over to other exchanges run by Financial Technologies.

The MCX Stock Exchange and the Multi Commodity Exchange of India (MCX) operate under regulators Sebi and the Forward Markets Commission, respectively, and could be supervised easily, he said.

NSEL is a company and was not regulated when it started business, he added.

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