CAD could fall below 3.8% this fiscal, says Montek

Deputy Chairman of the Planning Commission Montek Singh Ahluwalia on Sunday said that India's current account deficit (CAD) could fall below the projected 3.8 per cent of GDP in the current fiscal year, and the country will be in a better position to neutralise the impact of the tapering of monetary stimulus by the US Federal Reserve.

Ahluwalia told news persons in New Delhi that the delay in tapering by the US and the stabilisation of the Indian rupee would have a positive effect on the economy.

''The bottom line on CAD is that news is very good. It will be lower than 3.8 per cent,'' Ahluwalia said.

Ahluwalia distanced the Planning Commission from the projection of member Saumitra Chaudhuri, who had earlier predicted a CAD of 2.5 per cent. However he added, ''If you view the growth grooming because of agriculture and (its) impact on non-agriculture demand which is not very import-intensive then current account deficit may be lower."

Stating that the finance ministry estimates of CAD were made six months ago, Ahluwalia said that imports were affected because of low growth. The government expects GDP growth to range between 5 per cent and 5.5 per cent this fiscal.

During 2012-13, India's CAD was at all-time high of 4.8 per cent of GDP or $88.2 billion. The government proposes to bring it down to $70 billion or 3.8 per cent of the GDP.

Elaborating further Ahluwalia said, "The US taper is delayed. Secondly the CAD looks good. By the time taper happens, we are going to look in much better shape ... now the rupee has come to a much more maintainable position. So the threat on the rupee will be much less as and when the taper happens. So we will be in a better situation (next year)."

During the first quarter (April-June) this fiscal, Indian economy grew at 4.4 per cent; lower than 4.8 per cent in the previous (January-March) quarter. The economy had grown at a decade-low rate of 5 per cent last fiscal.