Monday, 31 March 2014

Current account deficit may be contained at $33 b this fiscal

The current account deficit (CAD) for 2013-14 is likely to be contained at around $33 billion, much lower than the initial projection of $70 billion and around $88 billion of 2012-13.
One of the two primary components of the balance of payments, CAD is the sum of the balance of trade (net revenue on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.
“The year could end with CAD of 1.8 per cent of GDP,” Saumitra Chaudhuri, Planning Commission Member, told Business Line. The deficit is down mainly due to significantly lower gold import and recovery in exports. This new estimate has also come amidst the rupee strengthening and breaching the 60/$ mark, and the RBI adding dollars to the forex reserves. Now, it is expected that lower CAD will further boost the rupee.
The latest estimate is better than the $40 billion Finance Minister P Chidambaram had projected in a statement on March 7. It is also close to Nomura’s projection of $34.7 billion. It may be noted that CAD in first nine months (April-December) of current fiscal stood at $31.2 billion.

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