CAD estimates, robust core sector growth bring cheer to the economy - Economic Times

MUMBAI/ NEW DELHI: India's external economy didn't deteriorate as badly as expected in the June quarter as the government's efforts to rein in gold imports paid off while the core sector grew at its strongest pace in seven months, providing more good news for an embattled economy that's yet to show any definite signs of revival.

Rising pressure on government finances meanwhile took some sheen off the good set of macro numbers. The government has exhausted three-fourths of its fiscal limit for the entire year in April-August, suggesting an expenditure squeeze ahead if the target is to be met.

The current account deficit (CAD), the difference between spending overseas and earnings, widened to 4.9% of GDP in the June quarter from 3.6% in the March quarter, or to $21.8 billion from $18.1 billion. The median of 26 estimates in a Bloomberg News survey had been for a $23-billion gap.

The numbers are expected to get better as the year progresses, closer to the finance ministry's estimate of a $70-billion deficit for FY14 and down from a record $87.8 billion last fiscal. The finance ministry expects CAD at 2.6% of GDP, or at $48.2 billion, for the full year based on the latest trends, ETreported Monday.

"The trend towards lower CAD over the next three quarters is reasonable, because there has been a sharp depreciation in the rupee and that should help in pick-up of exports," said Subir Gokarn, economist at the Brookings Institution and a former RBI deputy governor.

Sensex slumps 347 points
The Sensex slumped 347 points, or nearly 2%, on Monday, hit by fears the US government is heading towards a possible shutdown, political jitters in Italy, and lacklustre Chinese manufacturing data. The Nifty fell 97 points, or 1.68%.

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