account deficit for current year at just 2.6% of GDP
ET SPECIAL:
NEW DELHI: Predictions of a balance of payments crisis in India similar to the one in 1991 may have been exaggerated. Based on the latest data, the finance ministry expects the current account deficit for the current year at 2.6% of GDP
or $48.2 billion, much below its August estimate of $70 billion or 3.7%
of GDP and a big improvement over the record 4.8% posted last fiscal.
Finance minister P Chidambaram should not only be able to fund this deficit, as he has been repeatedly promising, but also add $20 billion to the foreign exchange kitty in the fiscal."The numbers are looking much better now," said a senior government official aware of the latest current account deficit projections.
Some private estimates have also pointed to a dramatic improvement in this measure of the economy's external health.
A rapid slide in the rupee to an all-time low of 68.81 to the dollar at the end of August had raised concerns over a ballooning current account deficit.
A Credit Suise note pegs the 2013-14 current account deficit even lower than the ministry estimates, assuming better inflow from invisibles, including IT exports.
"India's high invisibles (services exports mainly) mean CAD decline is even sharper. CAD of $35 billion is possible if IT services exports rise 7%," the brokerage said, adding that it can be funded easily just with FDI flows and NRI deposits. "I expect it to be lower than $70 billion... It could be between 3-3.5%," said Abheek Barua, chief economist, HDFC Bank.
The dramatic improvement is based on better-than-expected exports, compression in gold and other imports and tempered demand for oil. Exports rose 4% in April-August, against the ministry's earlier estimate of 1.8% growth.
If this rate is maintained, and indications are it will be, the ministry expects exports for the full year at $319 billion against $312 billion estimated in the current account deficit break-up given by the finance minister in August that pegged the shortfall at $70 billion.
The robust order book position of exporters amid signs of a recovery in developed countries, their main markets, could actually see growth in shipments accelerate.
The Federation of Indian Export Organisation (FIEO) lobby group expects a 25% rise in shipments in the September-December period. The rupee depreciation and steps to rein in imports are expected to slow down both gold and non-oil imports.
The latest estimates peg gold imports at $35 billion against the previous estimate of $38 billion. This assumes a sharp compression in gold imports to 800 tonnes in 2013-14. Gold imports have already come down, with April-August imports at 375.5 tonnes from a year earlier.
Finance minister P Chidambaram should not only be able to fund this deficit, as he has been repeatedly promising, but also add $20 billion to the foreign exchange kitty in the fiscal."The numbers are looking much better now," said a senior government official aware of the latest current account deficit projections.
Some private estimates have also pointed to a dramatic improvement in this measure of the economy's external health.
A rapid slide in the rupee to an all-time low of 68.81 to the dollar at the end of August had raised concerns over a ballooning current account deficit.
A Credit Suise note pegs the 2013-14 current account deficit even lower than the ministry estimates, assuming better inflow from invisibles, including IT exports.
"India's high invisibles (services exports mainly) mean CAD decline is even sharper. CAD of $35 billion is possible if IT services exports rise 7%," the brokerage said, adding that it can be funded easily just with FDI flows and NRI deposits. "I expect it to be lower than $70 billion... It could be between 3-3.5%," said Abheek Barua, chief economist, HDFC Bank.
The dramatic improvement is based on better-than-expected exports, compression in gold and other imports and tempered demand for oil. Exports rose 4% in April-August, against the ministry's earlier estimate of 1.8% growth.
If this rate is maintained, and indications are it will be, the ministry expects exports for the full year at $319 billion against $312 billion estimated in the current account deficit break-up given by the finance minister in August that pegged the shortfall at $70 billion.
The robust order book position of exporters amid signs of a recovery in developed countries, their main markets, could actually see growth in shipments accelerate.
The Federation of Indian Export Organisation (FIEO) lobby group expects a 25% rise in shipments in the September-December period. The rupee depreciation and steps to rein in imports are expected to slow down both gold and non-oil imports.
The latest estimates peg gold imports at $35 billion against the previous estimate of $38 billion. This assumes a sharp compression in gold imports to 800 tonnes in 2013-14. Gold imports have already come down, with April-August imports at 375.5 tonnes from a year earlier.
raj kishore sharma
pgdm1st year
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