It's the gold, stupid

Written by Sunil Jain | Updated: Oct 15 2010, 17:32pm hrs
Analysts whore beginning to panic over the current account deficit$13.7 billion in April-June 2010 as compared with $4.5 billion in April-June 2009would do well to relook the data. Rajeev Malik at CLSA has done precisely that, for 2009-10, and finds that the estimates are overstated by at least a tenth or thereabouts.

India imported $29.1 billion of gold and silver and another $16.3 billion of precious and semi-precious stones. Take out the exports of gems and jewellery of $29 billion, and you get net imports of $16.5 billion of gold, used for either investment or domestic purposesthe years current account deficit was $38.4 billion. Malik then assumes a fourth of this is bought as an investment, as opposed to just buying jewellery for use. In which case, the current account deficit is overstated by about a tenth.