The Reserve Bank of India last week liberalised gold import norms under the 80:20 rule. Gold imports, therefore, are expected to rise in May.
India's current account deficit is likely to widen to USD 45-50 billion this fiscal, after shrinking to USD 32.4 billion in FY14, according to economists.
Easing of gold imports and increased demand for other imports as the economy recovers could drive this trend, they say.
"As restrictions on gold imports get relaxed to some extent and as domestic demand starts picking up from the second half of FY15, we expect imports growth to rise and stabilize, which ought to push the CAD higher," says a Deutsche Bank report, which predicts a CAD of USD 50 billion in FY15.
However, the bank is not particularly worried about the increase in CAD and considers it as sign of stabilisation of domestic demand in the economy, rather than signals of any imbalances being created.
India Ratings, an arm of global rating agency Fitch, estimates CAD for FY15 around USD 45 billion.
The Reserve Bank of India last week liberalised gold import norms under the 80:20 rule . Gold imports, therefore, are expected to rise in May.
Media reports say Prime Minister Narendra Modi, who led the Bharatiya Janata Party (BJP) to a landslide victory in the recent general elections, is in favour of easing import curbs on gold.
As a step to reduce gold imports and ease the pressure on rupee, the government last year doubled import duty on gold and ruled that 20 percent of imported gold be exported, which is known as the 80:20 rule.
The curbs on gold imports helped the country trim its CAD to 0.9 percent of GDP in the December 2013 quarter against 6.5 percent a year before.
(Posted by Anjali Agarwal)
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