)
Chief Economic Advisor Raghuram Rajan today said the Centre’s current account deficit in the fourth quarter (January-March) of 2012-13 would be below four per cent of the gross domestic product, helped by softening gold and crude oil prices.
He said CAD was likely to be five per cent in 2013-14. “First, it will come below five per cent this year. We have to bring it below four per cent next year, and even lower in the coming years,” Rajan said during an interaction with reporters.
CAD touched an an all-time high of 6.7 per cent during the third quarter of 2012-13. It stood at 5.4 per cent, or $71.7 billion, in the first nine months of the year.
Rajan said gold prices, which had come down recently, might pick up again during the wedding season. But if oil stayed at the current level, he said, the government would get some relief. Oil imports were $170-180 billion and even a 10 per cent drop would bring substantial benefit, he said.
Stressing the need to attract long-term funds, he said a spike in exports was not expected in the short term but over the medium term, there should be an increase. Exports in March increased by about seven per cent to $30.84 billion, while for April-March 2012-13 it saw a drop of 4.4 per cent to $300.60 billion. Rajan said the fiscal deficit for 2012-13 would be less than 5.2 per cent of the GDP, but the economy was not out of the woods yet and there were still some worries.
Asked about the roadshows conducted by the government abroad, Rajan admitted that there were concerns about the cost of doing business in India, but the government was trying to address all those issues. He also made a strong pitch for taking foreign direct investment limit in the insurance sector to 49 per cent to help the industry grow and attract long-term funds.
“Insurance companies need more capital. Over the next five years, another Rs 50,000 crore would be needed. That is not going to come easily from Indian capital markets…. Banks are the lifeblood of a country. If we are allowing 74 per cent FDI in banks, then we must ask ourselves, what is the rational behind keeping it at 26 per cent for insurance,” he noted.
The government was also looking at increasing FDI caps in other sectors, he said, but insurance and the Goods and Services Tax (GST) were the two key Bills that needed to be cleared first to send a strong signal that the government was moving in the right direction.
In the last decade, insurance companies have brought in capital of Rs 32,000 crore, out of which Indian promoters invested about Rs 21,000 crore.
The Rajya Sabha was scheduled to consider the Insurance Laws (Amendment) Bill last week but it could not be taken up as the House witnessed continuous adjournments over various issues.
