Buoyed by the current account nearing surplus for the first time in nine years, the government today said reduction in CAD is a sign of economic health and it is committed to sticking to its targets.
The current account deficit (CAD)- the broadest measure of trade and investment – at $0.3 billion in January-March compared with a deficit of $7.1 billion in the previous quarter. India last had a current account surplus of $4.2 billion in the three months to March 2007.
“CAD is certainly better than last year. CAD reducing is a healthy sign. It is one of the major macro indicators of economic health of the country. Certainly, it’s a good number,” Finance Secretary Ashok Lavasa told PTI.
The current account deficit for the full 2015-16 came down to $22.1 billion (1.1 per cent of GDP), from $26.8 billion (1.3 per cent) in 2014-15.
CAD – the difference between inflow and outflow of foreign exchange – in 2015-16 has improved on the back of increase in foreign direct investment and contraction in trade deficit. Lower oil prices and a drop in gold imports have helped CAD.
Asked if the government is confident of meeting the Budget targets, Lavasa said: “We are certainly working in that direction. Whatever macro economic numbers are there, we are certainly working towards maintaining that.”
In 2016-17 Budget, Finance Minister Arun Jaitley had pegged the fiscal deficit at 3.5 per cent of GDP, down from 3.9 per cent in 2015-16.
Total government expenditure in the current fiscal would be Rs 19.78 lakh crore. Of this, Rs 5.50 lakh crore would go towards Plan expenditure and another Rs 14.28 lakh crore towards non-Plan expenditure.
Indian economy has gained traction during the last two years and extended its lead as the world’s fastest-growing large economy with a GDP growth of 7.6 per cent in 2015-16. At 7.9 per cent, it has even surpassed China’s 6.7 per cent growth in the March quarter – the Communist country’s slowest expansion in seven years.
Meanwhile, HSBC Global Research in a report said, “We expect CAD to remain ‘sustainable’ under 1.5 per cent of GDP and FDI flows to remain robust over the next year.”