New Delhi: Current Account Deficit is likely to be lower than the projection of 3.8 percent of the GDP and India will be in a better position to neutralise the impact of the tapering of monetary stimulus by the US Fed, Planning Commission Deputy Chairman Montek Singh Ahluwalia has said.
“The bottom line on CAD is that news is very good. It will be lower than 3.8 percent,” Ahluwalia told reporters here.
The current account deficit is the difference between inflow and outflow of foreign exchange. During 2012-13, the CAD was at all-time high of 4.8 percent of GDP or USD 88.2 billion. Government proposes to bring it down to USD 70 billion or 3.8 percent of the GDP.
Elaborating further Ahluwalia said: “Taper is delayed. Secondly the CAD looks good. By the time taper happens, we are going to look in much better shape.. Now 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).”
Tapering refers to gradual withdrawal of monetary stimulus by the US Federal Reserve. The reversal of the easy money policy by the US is expected to impact the global markets as well as the economy.
Asked about the Planning Commission Member Saumitra Chaudhuri's projections that CAD will be 2.5 percent or range between USD 40-45 billion, Ahluwalia said: “It is not a Planning Commission's estimate. This is his personal estimates.”
However supporting Chaudhuri's estimates, he said: “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.”
Elaborating further he said: “Finance Ministry made this projection (of CAD) six months ago...When Finance Ministry made its projection, may be, it had higher assumption of growth. The problem is that growth is low. The imports are affected because of growth.”
During the first quarter (April-June) this fiscal, Indian economy grew at 4.4 percent lower than 4.8 percent in the previous (January-March) quarter. Economy has grown at a decade low rate of 5 percent last fiscal. The government expects the growth to range between 5 to 5.5 percent this fiscal.