Credit rating agency Moody's has came up with a report that is likely to soothe the nerves of outgoing government and give some respite to the coming government. In its latest report the ratings agency has said that the sharp fall in India's current account deficit (CAD), will limit its vulnerability to global financial market volatility, though persistently high inflation remains a major risk.
India's CAD, the broad measure of gap between dollar outflows and inflows, dropped sharply to $4.2 billion or 0.9% of GDP during the passing quarter (October-December 2013) from $31.9 billion or 6.5% of GDP in the same quarter last year, the lowest level in eight years. The decline was due to rising exports and measures to rein in huge gold imports. Now the country is looking on course to contain the deficit within $45 billion in 2013-14, down from $88 billion last year.
Moody’s Investors Service further stated that a reduction in India's current account deficit will limit its susceptibility to swings in global financial markets. The agency which rates India's sovereign debt at “Baa3” with a stable outlook, however warned that the country's high inflation rate still poses risk.
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