In a bid to tackle volatility in the currency market, Finance Minister P Chidambaram said the government would work towards limiting the current account deficit (CAD) to 3.7 percent of GDP, or $70 billion in 2013-14.
Further, he said the deficit would be financed fully and safely.
In order to restrict the current account deficit to 3.7 percent of GDP, government plans to control demand for imports.
Government plans to raise duties on a host of non-essential items that could include electronic goods, alcohol, automobiles and precious metals such as gold and silver.
The finance ministry has identified 345 such items, on which duties could be raised as early as Tuesday. Further, the government expects a natural compression in oil demand resulting in dollar savings of about $1.5 billion.
Meanwhile, the government and Reserve Bank of India aim to attract as much dollar funds as possible in order to meet the current account deficit.
For instance, in a bid to attract dollar deposits from non-resident Indians, RBI plans to deregulate interest rates on three-year deposits and exempt all incremental flows under this head from statutory liquidity ratio, cash reserve ratio and priority sector lending requirements.
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