New Delhi: Declining prices of crude oil in the international market is good news for India as it will help contain current account deficit (CAD) and ease pressure on rupee, a senior finance ministry official said on Monday.
“There is a feeling that the CAD is going to get reduced, thanks to the crude prices going down,” economic affairs secretary R. Gopalan told reporters on the sidelines of a Ficci event here.
International crude oil prices have declined to $103 per barrel from $117 in April.
The CAD, which arises when import of goods and services exceeds their exports, had touched 4% of GDP at the end of December 2011.
The rupee dipped to a historic low of 56.52 against the US dollar last week mainly because of withdrawal of funds by foreign institutional investors. The rupee has declined more than 11% since March. It was trading around Rs55.58 against the dollar in early trade on Monday.
“The Reserve Bank is constantly monitoring the exchange rate,” he added.
He further said the Indian economy will clock a growth of over 7% and the government would strive to stick to the projected numbers.
The government has budgeted to bring down fiscal deficit to 5.1% of GDP in the current fiscal from 5.76% in 2011-12.
“The growth which we are looking at will be definitely higher than what has been projected, what has been given last year. It could be in the range of 7% plus... But we have to see how the external conditions behave,” Gopalan said.
India’s economic growth fell to a 9 year low of 6.5% in 2011-12 mainly on account of poor performance of manufacturing sector and slowdown in global economy. The GDP is projected to grow by 7.6% in the current fiscal.
“We are constantly evaluating the eurozone issue. We need to look at how the Greece elections turn out to be, the Italian and Spanish issues are going to be tackled, employment in the US is another area of concern,” he added.
He said with the lowering of the global crude oil prices, there is a possibility of inflation coming down.
“The good thing is that crude prices are going down. So that has some positives for us. But at the same time, if the imported costs of materials also go down, then imported inflation could be contained and to that extent inflation numbers would also come down,” he said.
The WPI inflation was 7.23% in April, while the retail inflation was 10.36%.