High current account deficit linked to collapse in iron ore exports, rise in coal imports: Gokarn

CHENNAI:
The high current account deficit is due to collapse in iron ore exports and rise in coal imports, according to former Reserve Bank of India deputy governor and research director of Brookings India Subhir Gokarn
Delivering the keynote address during the Conference on Emerging Issues in Banking and Finance, Gokarn said that reduction in iron ore exports and fall in coal imports besides pressure from rising oil prices and gold imports has increased the current deficit.
These are the micro causes whch have resulted in macro-economic issues, he said.
He also said that the present economic situation hitting the world is different from the 2008 economic downturn. During 2008, the  liquidity was pushed into the system not sucked it out. RBI and other central banks increased liquidity. At that time, inflation was nominal and oil prices have dropped and it was typical slowin growth. But now we have a situation where the liquidity is withdrawn from the system. The growth is low and rupee is depreciating and inflation is not only high but threatens to be higher because of ruppee depreciation.
Talking of the rupee depreciation, Gokarn said tat the government had two options before it. One was reduce the supply of rupee or increase the value of dollar to which it is pledged. The government has gone for the second option, he said.
Gokarn also shared his expertise on monetary policy, financial regulation, corporate governance and globalization.  He said said, “Every crisis is a mix of challenge and opportunity, challenge to deal with it and opportunity to grow. As a result what we have today is the powerful ensemble of sharp minds who could overturn any given financial crisis.”
The conference is an annual activity part of Union Bank Center of Excellence at Great Lakes Institute of Management.  Over 70 papers from all across the globe were submitted, of which 15 papers were selected to be presented on the day of conference. Participants from countries like Mexico, Malaysia, Indonesia and Philippines etc took part in the conference. The conference aimed at promoting new and innovative ideas in the field of finance and economy.