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Last Updated:[02-03-2011 04:24:44 EDT] Zoom in Zoom out Back to Tradenews

Government encouraging exports to contain rising CAD

tradenews Worried over the rising current account deficit, the government today said that it is providing incentives to exporters to encourage overseas shipment to bridge the rising gap.

"We are concerned about the current account deficit. The bigger worry is how we are funding it rather than the actual amount of deficit," Revenue Secretary Sunil Mitra said while addressing an Assocham event here.

The current account deficit has been projected at 3.5 per cent of the GDP for the fiscal 2010-11.

The country's CAD, representing the difference in inflows and outflows of foreign exchange, barring capital movements, stood at 2.9 per cent of the GDP last fiscal.

"The government has already announced schemes to reward exporters with a view to increasing our overseas shipments. But we cannot impact global market and global events," Mitra added.

During the April-January period of 2010-11, India's exports grew by 29.3 per cent to $ 184.63 billion vis-à-vis the year-ago period.

Even the Reserve Bank had expressed concern over the high current account deficit and said the numbers are not sustainable and may widen further with the recovery of the global economy.

It also pointed out that although the trade data shows an improvement in exports vis-à-vis imports recently, the sharp increase in global commodity prices, particularly oil, could have an adverse impact on the trade balance going forward.

India's current account deficit surged 72 per cent to $ 15.8 billion in the July-September quarter over $ 9.2 billion in the same period last year due to higher imports.

India's current account deficit widened to $ 27.9 billion during the first half of 2010-11, compared to $ 13.3 billion in the corresponding period last year.

Mitra said the government is confident of achieving the fiscal deficit target of 4.6 per cent set for the next financial year (2011-12).

Finance Minister Pranab Mukherjee in his Budget speech yesterday has pegged the fiscal deficit for the next fiscal at 4.6 per cent, lower than his previous estimates of 4.8 per cent. For the current fiscal, fiscal deficit is pegged at 5.1 per cent of GDP.

"We are confident of achieving the 4.6 per cent fiscal deficit in 2011-12. But there are challenges like rising global commodity prices, high domestic inflation and the current Middle East crisis which is pushing up crude oil prices," Mitra added.

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