The external current account deficit (CAD) remains our biggest worry today. We closed 2012-13 with a CAD at 4.8% of GDP. That was much too large an asking number for capital account inflows to keep the rupee on an even keel. Gold imports alone stood at $54 billion, a whopping 61% of the overall current deficit.

Without gold imports, our CAD in 2012-13 would have been a little under 2% of GDP, a well-behaved and totally tractable level. So our external problem reduces to the gold problem. Read More