CAD to be 5% in 2012-13; efforts on moderate it: PM

The CAD had touch a record high of 6.7 percent in December quarter.

New Delhi: Prime Minister Manmohan Singh on Wednesday said the government will make every effort to woo foreign investment to bring down the Current Account Deficit (CAD) which is estimated at 5 percent of GDP in the 2012-13, twice the comfort level.

"Fiscal expansion has led to an expansion in the current account deficit which is expected to be around 5 percent of GDP. This is more than twice the traditional comfort level of say 2.5 percent," Singh said while addressing CII AGM here.

The CAD, which is the difference between the outflow and inflow of foreign currency, had touch a record high of 6.7 percent in December quarter mainly on account of higher gold and oil imports and slowdown in exports.

"We can expect some reduction from this level in 2013-14, reflecting the lower fiscal deficit targeted in the Budget and also the lower subsidies on petroleum products.

"However, this reduction will be modest initially. We must therefore plan to finance a higher than normal current account deficit for a few years," Singh said.

During April-December 2012, CAD stood at USD 71.7 billion accounting for 5.4 percent of GDP as against USD 56.5 billion (4.1 percent of GDP) in the same period of 2011.

He said the government was able to finance CAD of over USD 90 billion in 2012-13 without a loss in forex reserves. "We will take all steps to ensure that inflows remain strong for the next two years," he said, adding the country has to learn to cope with higher CAD and weak exports.

Finance Minister P Chidambaram has been touring important financial centres across the globe to woo investors and has visited Singapore, Japan, Hong Kong in this regard. He is scheduled to travel to US later this month.

The government has already constituted an eight-member panel, headed by Economic Affairs Secretary Arvind Mayaram, for giving clear definitions to FDI and FII, a move aimed at removing ambiguity in the types of foreign investments.


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