Govt taking steps to contain CAD: Gopalan

Manila: Dismissing concerns over high current account deficit (CAD), India on Saturday said it was not a major problem and the government has already initiated steps to contain it. "The question about the sustainability of the levels of CAD need to be allayed by limiting the size of the deficit in the medium term; in the short run the financing of the CAD is not a serious issue in terms of an impending macroeconomic crisis," Department of Economic Affairs Secretary R Gopalan said here.

The Government has already taken measures to contain import of gold and increased duty rates, he said in a presentation at the ADB`s 45th annual meeting here. It is estimated that India`s CAD during 2011-12 would be over 3.5 per cent of the GDP (Gross Domestic Product). CAD results when a country`s total imports and transfers are higher than its total exports and transfers, making it a net debtor to the rest of the world.

Gopalan also said that the government takes the country`s credit ratings very seriously. "Let me also touch upon the issue of credit rating which we take as a wake-up call. Major credit rating agencies give out the sovereign credit rating of each nation as an absolute grade, it may be important to look at the ratings relative to others," he said.

The statement assumes significance in light of the recent action by global credit rater Standard and Poor`s. It revised downward the rating outlook from stable to negative. Gopalan said the Budget 2012-13 focuses on creating conditions for rapid revival of high growth in private investment and addressing supply bottlenecks in agriculture, energy and transport sectors, particularly in coal, power, national highways, railways and civil aviation.

A harmonised master list of infrastructure will help in removing ambiguity in the policy and regulatory domain and encourage investment in the infrastructure sector, he added. Gopalan said the government is working on confidence building measures with the industry relating to power, coal and other core sectors.

"We gather that those who have cash for investments already are waiting for reversal of interest rate signal to invest," he said. Gopalan also said that about 41 per cent of the money raised by 47 companies through Independent Power Producers 2008-10 has been placed in liquid assets such government securities and corporate bonds. Only 35 per cent was used for capex.

He said India continues to be an important destination for foreign direct investment and during January-November 2011, "organic growth was considered to be most appropriate feature of FDI in India". Sustained accelerated growth is a pre-requisite for the inclusive growth agenda that India is pursuing, he added.