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According to Revenue Secretary Shaktikanta Das, the geopolitical tensions across different parts of the world can likely cause adverse implications on the country’s CAD situation. The war-like situations in the Gulf and other Middle Eastern countries could push up oil prices. This in turn may inflate the import bill, thereby adding pressure to CAD. The international currency volatility also needs to be watched cautiously, he added.
The Finance Ministry notes that though the CAD problem has been contained, the situation is volatile and fluid. Any change in gold import rules can make things go out of control. Hence a cautious approach is needed.
By seeing a sudden surge in the import in 2013 beginning, the government had increased the gold import duty to 10 percent in phases. The Reserve Bank of India and the government have also imposed other import restrictions which include the imports to exports linking to stop foreign exchange outgo. The country’s CAD had surged to USD 88.2 billion or 4.7 % of GDP in 2012-13, due to high gold imports. By curbing the imports, the CAD had slumped down to USD 32.4 million or 1.7 % of GDP in 2013-14.
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