Discourage gold imports to maintain BoP: Survey

New Delhi: Worried over worsening balance of payment situation, the Economic Survey today asked the government to take steps to discourage import of gold and consumer goods. A trade deficit of more than 8 per cent of GDP and current account deficit (CAD) of more than 3 per cent is a sign of growing imbalance in India`s Balance of Payments (BoP), the survey said.

"There is scope therefore to discourage unproductive imports like gold and consumer goods to restore balance," it added. India`s gold imports went up by 64 per cent to USD 38.3 billion during the April-October period of this fiscal. BoP summarises transactions between a country and the rest of the world, and the account classifies transactions under two heads – capital account and current account. In the second quarter, BoP showed only a marginal surplus of USD 276 million compared to USD 3.29 billion a year-ago.

During the first quarter, BoP surplus was at USD 5.44 billion, taking the total account showing an overflow of USD 5.7 billion for the first half. The survey pointed out that high trade and current account deficits, together with high share of volatile FII flows are making India?s BoP vulnerable to external shocks. "Greater attention therefore has to be given to improving the composition of capital flows towards FDI," it said.

CAD has increased to USD 32.8 billion in the first half of 2011-12, as compared to USD 29.6 billion during the corresponding period last fiscal, mainly on account of higher trade deficit. FII inflows showed marginal increase to USD 29.4 billion in 2010-11, from USD 29.0 billion in 2009-10.