India’s current account deficit seen falling to 3.5 per cent

The government expects India's current account deficit to come down to around 3.5 per cent of the gross domestic product (GDP) by the end of the current financial year, C Rangarajan, chairman of the prime minister's economic advisory council, said today.

Rangarajan attributes the likely decline to lower imports of gold amidst rising global prices and lower demand at home.

Combined with a fall in oil prices and better capital inflows, the 2011-12 level of current account deficit of around 4.2 per cent of GDP should come down to around 3.5 per cent, he said.

Boosted by rising imports of gold and high oil prices, India's current account deficit rose to 4.2 per cent of GDP in the 2011-12 fiscal. Gold import in 2011-12 stood at $62 billion, against $43 billion in the previous year.

He said the government expects the current account deficit to come down to 3.5 per cent of the GDP over the medium term.

''Over the medium term, efforts are being made to keep the current account deficit around the manageable level of 2.5 per cent of the GDP.''

This, however, also depends on the rupee ending its downslide, he added.