Gold and silver imports declined 71.4% to $1.63 billion in February mainly due to restrictions imposed by the government on inbound shipments of the yellow metal to narrow the current account deficit.
Imports of gold and silver in February 2013 stood at $5.24 billion. In January this year, they were $1.72 billion.
Imports of the precious metals during April-February declined 41.47 per cent to $30.7 billion from $52.4 billion a year earlier.
Lower imports helped to narrow the trade deficit to $8.13 billion in February from $14.1 billion. India's current account deficit (CAD), which is the excess of foreign exchange outflows over inflows, touched a historic high of
4.8 % of GDP in 2012-13, mainly due to rising imports of petroleum products and gold.
A high CAD puts pressure on the rupee, which in turn makes imports expensive and fuels inflation.
According to a finance ministry official, the CAD is expected to fall by almost 50% to $45 billion in the current financial year. The Reserve Bank had last month projected CAD at less than $50 billion, or 2.5% of GDP, down from $88.2 billion, or 4.8% of GDP, in 2012-13.
The Centre revised that figure to $ 40 billion this financial year. “We can say confidently that the CAD will be contained at below say $40 billion,” P Chidambaram told reporters at an RBI meet earlier.
The CAD, the excess of foreign exchange outflows over inflows, narrowed to $26.9 billion (3.1% of GDP) in the first half (April-September) of 2013-14 from $37.9 billion (4.5% of GDP) in the first half of 2012-13.
It narrowed sharply to $4.2 billion (0.9% of GDP) in Q3 from $31.9 billion (6.5%of GDP) a year earlier as merchandise exports picked up and imports moderated, particularly gold imports, the RBI said on March 5.
Both the government and the Reserve Bank of India had taken steps to restrict gold imports, one of the main causes for the widening CAD in 2012-13.
The government increased customs duty on gold thrice in 2013 to 10%and the RBI imposed a series of curbs on inward shipments of the metal. Chidambaram expressed confidence the government would achieve the revised fiscal deficit target of 4.6 % in 2013-14.
“We will achieve the fiscal deficit target for the current year. The revised estimate says 4.6 per cent and I am absolutely confident that we will achieve the target,” he said. The gap between expenditure and revenue was 4.9%