This is the government's fourth downward revision of its CAD estimate this fiscal. Speaking at a press conference after an RBI board meeting, Chidambaram said the economy is more stable than it was since he took charge.
The economy certainly is more stable today than what it was 18 months ago. That is reflected in the strengthening of the rupee, that is reflected in heightened interest of investors, both FDI and FII, he said. (In Q3, on net basis, foreign direct investment and portfolio investments stood at $6.1 billion and $ 2.4 billion, respectively).
I am glad that the measures taken by the RBI and measures taken by the government are complementing each other and have delivered substantially the goal of stability that we had set for ourselves 18 months ago, he added.
For the first half of the fiscal, Chidambaram forecast CAD at below $70 billion, compared to $88 billion in FY13. This was immediately after the US Federal Reserve's first indication of tapering its bond-buying programme led to emerging market currencies crashing. On August 28, the rupee reached a lifetime low of 68.85 versus the US dollar.
However, as the RBI and the government clamped down on high gold imports and pushed to narrow the trade deficit, the forecast for CAD improved. On November 1, the minister cut the forecast by $10 billion to below $60 billion.
In January, Chidambaram as well as economic affairs secretary Arvind Mayaram, said that the CAD will be below $50 billion. In his interim budget speech on February 17, Chidambaram gave yet another improved forecast and said CAD will be below $45 billion.
Even with the CAD set to come down, Chidambaram did on commit to any roll back in the high import duties for gold. He said that the matter would be revisited only after final CAD numbers come out for the year.
The minister also stuck to the Central Statistical Office's advance estimate of GDP forecast in FY14 of 4.9% despite the third quarter turning in a disappointing 4.7% growth. Growth has to be higher in the fourth quarter if we have to achieve 4.9%. I go by the numbers which my economic affairs division and the CSO give me. And so far, CSO has not revised its numbers, he said.