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High current account deficit a matter of concern: Subbarao

RBI is scheduled to announce its first mid-quarter review of monetary policy on June 17.

Calling current account deficit (CAD) a matter of concern, RBI Governor D Subbarao today said it would be factored in the monetary policy review later this month.

"CAD is a matter of concern and this is something which we will take into account in our monetary policy decision," he told PTI in an interview here.

RBI is scheduled to announce its first mid-quarter review of monetary policy on June 17.

The CAD, which is the difference between the outflow and inflow of foreign currency, touched a record high of 6.7 per cent in the October-December quarter on the back of rising oil and gold imports.

Dr Subbarao said it is a concern for a number of reasons including the fact that the country can run a large CAD one year but it cannot do it year after year.

"From the RBI's perspective, CAD is a concern because it has implications for the exchange rate and thereby for inflation," he added.

Listing steps that can be taken to deal with the problem of high CAD, Subbarao said, while exports have to go up, there is a need to quickly deal with the import side issues.

"If for example, petroleum sector prices are market- determined or close to market-determined, subsidies are reduced, then demand will adjust. That can help.

"Government has raised the customs duty on gold import. The RBI has come out with some regulations to restrain the import of gold. But we need to increase exports in a big way and reduce dead-weight import like gold," he said.

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