The Prime Minister's Economic Advisory Council said on Tuesday it expects gold imports to come down this fiscal which could reduce the current account deficit to 3.5 per cent of gross domestic product.
"We do expect CAD in the current year, that is 2012-13, to come down to something like 3.5 per cent from the high level of 4.2 per cent of GDP last year," PMEAC Chairman C Rangarajan said at an event in New Delhi.
India's CAD had touched a record high of 4.2 per cent of GDP in 2011-12, on the back of a wider trade gap and lower capital inflows.
Rangarajan said he expected gold and coal imports to decline in the current fiscal. He also said the capital flows should be encouraged into the country in the short term.
"I believe gold imports will come down this year. . . I think as inflation comes down and as the attraction for gold becomes less we should be able to import less gold.
"And also, if you increase the domestic production of coal, then the import of coal which we are doing on a large scale will also come down," he said.
In the 2011-12 fiscal, India's gold imports stood at $60 billion and the quantum of import was 1,067 tonnes.
In the April-June quarter of the current fiscal, however, gold imports had contracted by 18.4 per cent year-on-year to Rs 71,912 crore ($13 billion).
Besides, according to a draft paper on Energy by the Planning Commission, India's coal imports are likely to touch a whopping 185 million tonnes by 2017, almost 20 per cent of the international dry-fuel trade amid widening demand-supply deficit.
Rangarajan also said, "We should encourage capital inflows so that financing of the current account deficit does not become difficult."
Image: C Rangarajan