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  3. CAD to come down to1.2% of GDP in the current financial year: SBI report

CAD to come down to1.2% of GDP in the current financial year: SBI report

13 Mar 2015 Evaluate

State Bank of India (SBI) in the latest report by its economic research department has said that India’s current account deficit (CAD) is expected to come down to $ 25 billion, or 1.2 percent of GDP, in the current financial year, though it has cautioned that it could widen next fiscal on the back of pick up in the Indian economy. The report said that “We expect, FY15 CAD to narrow down further to below $ 25 billion or 1.2 percent of GDP. FY16 may see the CAD widening close to 2 percent of GDP, with the economy picking up.”

CAD, the difference between the inflow and outflow of foreign exchange, has narrowed to 1.7 percent of the GDP for the first nine months of the current fiscal, driven down by lower oil prices and higher services exports that offset the dip in merchandise shipments. CAD in the last fiscal stood at $ 32.4 billion, or 1.7 percent of the GDP, while it hit a record high of $88 billion, or 4.7 percent of the GDP, in 2012-13.

The CAD narrowed to $ 8.2 billion or 1.6 percent of GDP in Q3 FY15 from $ 10.1 billion or 2.0 percent of GDP in Q2. The report has said that the softening of the CAD in Q3 FY15 was primarily on account of net exports of services, which picked up on the back of an improvement in net earnings through travel and software services, and lower net outflows under primary income (profit, dividend and interest).

The report from the leading public sector lender further stated that net portfolio capital inflows in FY15 have crossed $ 44 billion (by 11 March, 2015) and net direct investment reached $ 30.3 billion in the first 10 months of FY15. Moreover, net FII and FDI inflow have crossed $73 billion in FY15, highest inflow ever since FY91.

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