India’s current-account deficit narrowed to a fresh four-year low as gold imports cooled, offering a potential boost for the rupee even as economists said the gap may widen again if the economy improves.
Gold imports by India, the world’s largest consumer, are plunging as an increase in tax and restrictions on financing shipments boost costs for jewelers, helping the nation contain a record current-account deficit.
India plans to unveil measures today to support the rupee as its slump to a record low against the dollar threatens to intensify price pressures and boost the cost to companies of repaying foreign debt.
India’s central bank Governor Duvvuri Subbarao may need to raise interest rates as capacity constraints in power and roads and record borrowings fuel inflation, an adviser to Prime Minister Manmohan Singh said.
It takes more than an hour to drive the 25 miles of clogged highway linking New Delhi to Noida Special Economic Zone. Inside the gate, a smooth four-lane road leads to electronics, engineering and textile plants that are at the heart of India’s plan to imitate China’s export success.
India’s government asked state-run companies to pay higher dividends to help narrow the budget deficit as slowing growth threatens to erode revenue, a finance ministry official with direct knowledge of the matter said.
India’s inflation may be “under pressure” until December and the central bank need not follow the policy of reducing interest rates being pursued by some counterparts abroad, Finance Minister Pranab Mukherjee said.
Record onion prices and the soaring cost of rice and coriander are frustrating Reserve Bank of India Governor Raghuram Rajan’s battle to curb inflation while supporting growth in Asia’s third-largest economy.