Finance Minister also confident of achieving fiscal deficit target of 4.6%

The current account deficit (CAD) will be kept under $40 billion in fiscal 2013-14, Finance Minister P Chidambaram said on Tuesday. Chidambaram also exuded confidence that the revised fiscal deficit target of 4.6 per cent (of the Gross Domestic Product) would be achieved.

Buoyed by the statements, the BSE Sensex rose 406 points to close at 21,919.79, while the NSE Nifty jumped 126 points to end at 6,526.65. The rupee strengthened to 61.07 against the dollar, against Thursday’s closing of 61.12. “On the current account deficit, the Budget speech said that it will be contained at below $45 billion; today, 23 days before end of the (financial) year, we can say confidently that CAD will be below $40 billion,” Chidambaram announced at a press conference after the customary post-budget RBI board meeting here. CAD is the difference between inflow and outflow of foreign currency. 

The latest revision comes two days after the RBI announced that the CAD had narrowed sharply to $4.2 billion or 0.9 per cent of GDP in the third quarter of current fiscal, against $31.9 billion or 6.5 per cent of GDP during the corresponding period in 2012-13.

The lower CAD was primarily on account of a decline in the trade deficit, as merchandise exports picked up and imports moderated, particularly gold.

“We will achieve the fiscal target of 4.6 per cent, as mentioned in the revised estimate,” Chidambaram said. The initial estimate was that the fiscal deficit would be 4.8 per cent of the GDP, and there were apprehensions that with lower revenue realisation and higher expenditure, the final deficit ratio could go beyond 5 per cent.

Incidentally, as per the Controller of Government Accounts data, the fiscal deficit has exceeded 101 per cent of the target. Chidambaram also said the the revised estimate of revenue collection would be achieved, and “if there is any small shortfall, I think that will be made up in actual savings that I have in mind.”

(This article was published on March 7, 2014)
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