Expect lower CAD in coming months: India Inc
New Delhi: Current account deficit of 4.9 percent in the first quarter was on expected lines and it is expected to improve in the coming months on the back of robust exports growth and dip in oil and gold imports, India Inc said Monday.
"What is important to note is the likely trend going ahead. In the months of July and August, exports have registered double digit growth and there has been a sizeable contraction in the import demand for gold," said Sidharth Birla, Senior Vice President, Ficci.
With global economic situation on the mend, our exports should continue to march ahead in the coming months. Further, with the oil ministry coming out with a comprehensive oil conservation plan, we could see a dip in oil imports in the subsequent quarters, he added.
High imports of gold and oil pushed CAD to 4.9 percent of GDP to USD21.8 billion in the April-June quarter of the current fiscal, the RBI said today.
During the quarter, while exports declined by 1.5 percent, imports recorded an increase of 4.7 percent. The trade deficit widened further to USD 50.5 billion in Q1 of 2013-14, from USD 43.8 billion a year ago, it said.
"The preliminary data on balance of payments is mostly on the expected lines but gives rise to some new concerns. The possible way out from this situation is to identify short term policy measures that can help reverse this trend," Assocham Secretary General D S Rawat said.
The government needs to consult the industry for identifying these immediate policy measures. In the long term, the country needs to review the outcomes of India's existing bilateral agreements while improving its manufacturing sector, he added.
Gold imports increased by USD7.3 billion in the first quarter of current fiscal. The imports stood at about 335 tonnes in the April-June quarter.
"The focus on curbing gold imports could be sharpened by promoting schemes that encourage citizens to bring idle gold into the market and monetise the same. Such measures would have a salutary impact on CAD," Birla said.
CAD, the difference between inflow and outflow of foreign exchange, was 4.4 percent or USD 16.9 billion in the same quarter of last fiscal, 2012-13.
The government plans to bring down CAD to 3.7 percent or USD 70 billion in the 2013-14 fiscal, from 4.8 percent or USD 88.2 billion in 2012-13.