Falling oil prices to ease pressure on R, cut CAD: Gopalan

?The good thing is that crude prices are going down. So that has some positive for us,? Gopalan said.

Global crude oil prices have tumbled by 17% since April to around $98 per barrel, as a deepening global macro-economic crisis has threatened to drag down demand.

The country’s CAD surged to an unprecedented level of 4.3% of the gross domestic product from 2.9% in the previous fiscal, thanks to a trade deficit of $184.9 billion in 2011-12 following record crude oil and bullion imports. The current account comprises the balance of trade, net factor income such as interest and dividends and net transfer payments.

India imported crude oil worth $155.6 billion in the fiscal year through March, up nearly 47% from a year before, while record bullion purchases from overseas worth $58 billion jeopardised trade balance and contributed in good measures to the weakening currency. The Indian currency has depreciated by 25% since last July to 55.66 on Monday against the dollar, driving up import costs. “The Reserve Bank Of India is constantly monitoring the exchange rate,” Gopalan said.

“We were highly dependent on oil import . and since there is a sharp correction in crude oil price it is certainly a positive sign and will help in reducing the CAD but the issue is how long it is going to hold. Our projection is that CAD will be around 3.6% by the end of this fiscal,” said Crisil chief economist DK Joshi.

The contraction in non-oil imports will be driven by a steep fall in the rupee against the greenback, falling commodity prices and subdued investment inflows, Nomura has said in a recent note.

Policymakers have been particularly worried about huge imports of an idle asset like gold driving up the CAD. Gold demand in India, the world’s largest consumer, fell 3% in value during the January-Match period to R56,650 crore, although in volume term, the slump was more pronounced at 29%, thanks to elevated level of prices and a strike by jewellers in March. Gold prices rose 32% in the Indian currency in 2011, and gained for an eleventh straight year, making the precious metal an attractive tool for investment in times of an economic crisis.

?…if the imported cost of the materials also go down, then imported inflation could be contained. And to that extent, inflation numbers would also come down,? Gopalan said.

Inflation rose 7.23% in April from 6.89% in the previous month on dearer food and manufactured items.

FM hopeful on indirect tax mop-up

Finance minister Pranab Mukherjee on Monday expressed the hope that the indirect tax mop-up of R5.05 lakh crore for the current financial year would be met despite a slowdown in growth.

?They (revenue officials) did a good job last year. This year also, I do hope it would be possible for them to do their job and realise the revenue target which has been fixed for them,? finance minister told reporters after addressing a meeting of officials of the Central Board of Excise and Customs (CBEC).