Helped by moderation in petroleum and gold imports, India’s Current Account Deficit (CAD) is estimated to come down to 1.3% of GDP in the fiscal ending March, significantly lower than earlier projections, according to Reserve Bank of India (RBI).
The CAD, which is the difference between the inflow and outflow of foreign exchange, was 1.7% of GDP ($32.4 billion) in 2013-14 and at a record high of 4.7 % ($88 billion) in 2012-13. Reserve Bank of India has projected lower CAD on account of sharp fall in international crude prices translated into a sizable saving on account of Petroleum Oil Lubricants (POL) imports. Also, gold imports, coming off the seasonal cum pent-up demand spurt in September-November, have moderated. Further, India’s central bank also pointed that non-oil non-gold import growth remained firm and in positive territory.
Notably, the CAD in the April-September period of current fiscal stood at 1.9% at $17.9 billion, down from 3.1% at $ 26.9 billion in the same period in 2013-14. Also, India's trade deficit declined to a 10-month low of $9.43 billion in December 2014, mainly on account of falling imports due to slump in crude prices, though exports too have come down.