Despite trade gap at 10-month low, CAD likely to be 4.3% - Firstpost

Would you like to make Firstpost your default homepage?   Yes | No India's current account deficit is likely to be 4.3 percent of the GDP, with "risks biased towards a wider deficit", Barclays said.  This is notwithstanding trade deficit falling to 10-month low of $14.9 billion in February on improving exports and a sharp drop in imports, it added. "Even with the lower trade gap in February, India's trade deficit remains high and its external position remains a concern," Barclays Capital economists Rahul Bajoria and Siddhartha Sanyal said in a research note. "Recent trends in trade flows and the balance of payments suggest that the current account deficit for FY 2012-13 is likely to remain above the previous year's 4.2 percent of GDP," the report said. Reserve Bank of India has also expressed concerns over high CAD and said that a high CAD will threaten macroeconomic stability and impact growth. Reuters The current account deficit (CAD) represents the difference between inflows and outflows of foreign currency. The CAD had touched a record high of 5.4 percent of GDP in the July-September quarter. The trade deficit in January widened to $20 billion, the second highest rise ever in a month. The biggest trade gap of $21 billion was recorded in October, 2012. Moreover a high deficit is likely to remain a "drag" on the rupee, Barclays said adding that the rupee is likely to be around 55/USD in the next 12 months. Currently, the rupee is hovering around the Rs 54 level against the US dollar. Meanwhile, the Reserve Bank of India has also expressed concerns over high CAD and said that a high CAD will threaten macroeconomic stability and impact growth. "Large fiscal deficits will accentuate the CAD risk, further crowd out private investment and stunt growth impulses," RBI had said in its third quarter monetary policy review. Over the last few months, the government has taken several steps to boost dollar inflows like de-regulating NRI deposit rates, relaxing ECB norms, increasing FII debt limits, liberalisation of FDI and postponement of GAAR and higher duties on gold. PTI Firstpost encourages open discussion and debate, but please adhere to the rules below, before posting. Comments that are found to be in violation of any one or more of the guidelines will be automatically deleted: Personal attacks/name calling will not be tolerated. This applies to comments directed at the author, other commenters and other politicians/public figures Please do not post comments that target a specific community, caste, nationality or religion. While you do not have to use your real name, any commenters using any Firstpost writer's name will be deleted, and the commenter banned from participating in any future discussions. Comments will be moderated for abusive and offensive language. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEKY2Bqqtp0GurgesQFJZ5V1M6YZw&url=http://www.firstpost.com/economy/despite-trade-gap-at-10-month-low-cad-likely-to-be-4-3-656532.html

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