India needs to promote exports, ink free trade agreements and put in place conducive savings and investments policies along with a stable exchange rate regime to keep the current account deficit under check, Commerce Secretary Rajeev Kher said today.
"Managing a sustainable CAD necessitates a conducive exchange rate regime and appropriate savings and investment policies. At the same time, it is important to manage large bilateral deficits through export promotion and policy dialogue," Kher said at the annual IIFT Convocation here.
"Preferential or Free Trade Agreements can help corporations become more price-competitive. At the same time, such trade regimes can lead to a surge in competition from cheaper imports originating from preferential trading partners," he added.
Vice President Hamid Ansari, who was also present at the event, said: "Fiscal consolidation, managing inflation, and calibrated liberalisation of capital inflows would help create an environment conducive to greater trade and investment flows".
"Expediting ongoing negotiations for our own Free Trade Agreements, Regional Trade Agreements, Preferential Trade Agreements in Asia, Europe, Africa and Latin America will be essential to counter protectionist tendencies in other parts of the world," the Vice President said.
Rising exports and moderation in gold imports pulled down India's current account deficit (CAD) sharply to USD 4.2 billion, or 0.9 per cent of GDP, in the December quarter of 2013-14.
"In spite of good economic prospects, Indian economy faces some challenges. The country has had high current account deficit for the past few years, which has been contained by export growth and restrictions of gold imports," Kher said.
The CAD, which reflects difference between inflow and outflow of foreign currency, stood at USD 31.9 billion, or 6.5 per cent of GDP, in October-December quarter of 2012-13.
It narrowed to USD 31.1 billion (2.3 per cent of GDP) in April-December 2013 from USD 69.8 billion (5.2 per cent of GDP) in April-December of 2012.
In his interim budget speech, Finance Minister P Chidambaram had said the year-end CAD will be contained at USD 45 billion, well below the record high level of USD 88 billion in 2012-13.
High gold imports were one of the reasons for the record CAD. The high CAD was adversely affecting the value of rupee and hurting investor sentiment.
