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Indian CAD may fall to zero in July-Sept quarter

sree45

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Helped by gold control measures, second quarter numbers for India’s current account deficit — the difference between inflows and outflows of foreign exchange in a period — could well show a level close to zero after it touched a worrying 4.9% in the April-June quarter, sending the rupee plunging.

There is even an outside chance of a current account surplus in the July-September quarter, a senior finance ministry official told HT. Official data is due to be released at the end of December.

Confirming this thinking, finance minister P Chidambaram told CNBC Awaaz in an interview that the rupee may strengthen further.




“We think that with more money coming in, the rupee should even go below 61...between 60 and 61 — that is a good sign,” he said. The rupee closed at 61.62 to the US dollar on Tuesday.

Internal research from the State Bank of India confirmed the zero deficit expectation. A research note from India’s largest commercial bank said a $20.5-billion cushion from a narrower trade deficit in July-September and estimated “invisibles” — a reference to remittances and earnings from tourism – in the quarter of about $30 billion will also strengthen the CAD position.

“We can expect some good news and the CAD which had become an issue until sometime back looks to be well within the limit and in the second quarter it could even touch a positive zone,” said Soumya Kanti Ghosh, chief economic adviser, SBI.

The rupee recovered from all-time lows this year on the back of the CAD widening to $88.2 billion — a record 4.8% of the GDP — in 2012/13.

“We think we can peg it (CAD) at 60 billion or below. I am confident that we can do even slightly better than 60 billion (in 2013/14),” the minister said.

A finance ministry official said gold imports were critical. “The curbs on imports will be critical to meet the deficit (CAD) target and we are monitoring the situation very closely,” the official said.

Officials said the CAD for 2013/14 could be as low as $55 billion, or 3.1% of the GDP, if imports are contained.

http://www.hindustantimes.com/busin...ro-in-july-sept-quarter/article1-1147627.aspx
 
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