Cad worries not by more import curbs

Cad worries not by more import curbs

Mind the fisc, mine more coal, boost exports.

Finance minister Arun Jaitley did the right thing by reassuring the investor community that the government is mindful of the current account deficit (CAD) and would maintain fiscal discipline. He has promised yet more measures to contain CAD. We would urge caution. It is not a good idea to selectively raise import duties or levy quantitative restrictions on specific items.

The RBI is already doing its bit to rein in CAD. By refusing to hike interest rates at a time of downward pressure on the rupee, it has signalled that further depreciation of the rupee would be quite in order. That is the surest way to curb imports across the board, as a dearer dollar would make all imports more expensive than before. But there are a couple of things that the government can and must do on this front. It is not just crude that is padding up the import bill. There is also coal, which the Monetary Policy Committee specifically referred to in its statement. The captive coal mines, whose allocation the present government had persuaded the Supreme Court to cancel soon after assuming office, are lying defunct for the most part. If those who have won the mines in auction are not interested in operating the mines, the government should take them back and re-allocate the mines that had been operating to their previous allottees, so as to step up domestic production and reduce coal imports. The whip should be cracked on Coal India, whose continued monopoly over domestic coal is a disgrace and a contributory factor to CAD stress. Next, the government should disburse, post-haste, all the GST refunds claimed by exporters from a contingency fund, unjustified claims being clawed back with penal interest. Raising export volumes is more vital than curbing imports.

Holding down the fiscal deficit is something the government alone can do. The gross public sector borrowing requirement, including of the states, is what matters, not just the Centre’s deficit. Smart policy, such as freeing up oil marketing to competition, must figure more than populist give-aways, in the run-up to the elections.