CAD may come down to 1.3% of GDP: RBI

The current account deficit is estimated to come down to 1.3 per cent of GDP in the fiscal ending March, helped by moderation in petroleum and gold imports, the Reserve Bank of India today said.

CAD, which is the difference between the inflow and outflow of foreign exchange, was 1.7 per cent of GDP ($32.4 billion) in 2013-14. It was at a record high of 4.7 per cent ($88 billion) in 2012-13.

“The estimate of the current account deficit (CAD) for 2014-15 is currently placed at 1.3 per cent of GDP, significantly lower than earlier projections,” RBI said in its bi-monthly monetary policy statement.

The fall in international crude prices translated into a sizeable saving on account of petroleum oil lubricants (POL) imports. Gold imports also moderated, coming off the seasonal-cum-pent-up demand spurt in September-November, it said.

Further, non-oil non-gold import growth remained firm and was in positive territory.

During the April-September period of the current fiscal, CAD stood at 1.9 per cent ($17.9 billion) against 3.1 per cent ($26.9 billion) in the same period in 2013-14.

“The CAD has been comfortably financed by net capital inflows, mainly in the form of buoyant portfolio flows but also supported by foreign direct investment inflows and external commercial borrowings,” RBI said.

India’s trade deficit declined to a 10-month low of $9.43 billion in December 2014, mainly on account of falling imports due to slump in crude prices, though exports too have come down.

Import bill declined by 4.8 per cent to $34.8 billion during the month from $36.6 billion in December 2013, leading to improvement in the trade balance situation.