India's Current Account Deficit (CAD) for 2012-13 is likely to be around 5 percent of the Gross Domestic Product (GDP), Reserve Bank of India said Thursday.
Mumbai: India's Current Account Deficit (CAD) for 2012-13 is likely to be around 5 percent of the Gross Domestic Product (GDP), Reserve Bank of India said Thursday.
"The CAD/GDP ratio for the year 2012-13 is expected to be around 5 percent, twice the sustainable level," the apex bank said in its Macroeconomic and Monetary Developments report released on the eve of the annual policy for 2013-14.
It further said CAD is likely to come down in the fourth quarter of the current fiscal, ending March 31, on the back of modest improvement in exports in the last few months.
"Modest pick-up in exports in Q4 of 2012-13 and some deceleration in imports are likely to help moderate CAD in Quarter 4 of 2012-13 after a record high of 6.7 percent of GDP in Quarter 3,"RBI said.
CAD, which represents the difference between inflows and outflows of foreign currency, had touched a record high of 6.7 percent of GDP in the December quarter of the last fiscal.
The reserve bank said that high CAD in December quarter of 2012-13 was adequately financed by capital inflows, without any reserves depletion.
It also expressed hope that CAD in 2013-14 would benefit from moderation in global commodity prices.
Recently, gold prices had fallen to 21 month low at Rs 26,440 per 10 grams in the domestic markets on April 16 due to continued sell off in the global markets.
Though there has been some recovery in gold prices in the spot as well as futures market, uncertainty looms large over the way prices would move going forward.
Gold prices had touched the all-time high of Rs 32,975 per ten gms on November 27, 2012.
The apex bank also expressed concern over rising external debt and short-term borrowings to meet the widening CAD.
"Short-term debt on a residual maturity basis increased to 44 percent of total debt and 56 percent of the foreign exchange reserves by end-December 2012," it said.