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More palliatives

On the govt’s announcement of more measures to contain current account deficit
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First Published: Tue, Aug 13 2013. 12 47 AM IST
Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint
The government on Monday announced more measures to curb imports, duties on gold, silver and other non-essential items. It chose the easy option.
The steps must be seen against two interlinked problems the government is fighting. Containing the current account deficit which, even at a conservative $70 billion estimate, is a threatening number. This has also hit the rupee hard, forcing the central bank to make hard choices.
The choices announced on Monday will prove expensive in the long run. Letting public sector units go in for quasi-sovereign bonds is a step that foreign investors may interpret as a sign of desperation, sharpening the problem it seeks to solve. The central bank, in any case, has never openly favoured this option.
Then, higher duties are the first step towards a regime of import controls, something that is easy to establish, but far more difficult to end.
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First Published: Tue, Aug 13 2013. 12 47 AM IST
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