CAD likely to narrow to 1.1-1.2 per cent of GDP in Q3, say rating agencies

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The country's current account deficit is likely to decline to 1.1-1.2 per cent of the gross domestic product in the third quarter, say rating agencies. (AP) The country's current account deficit is likely to decline to 1.1-1.2 per cent of the gross domestic product in the third quarter, say rating agencies. (AP)
SummaryCAD decline based on trade deficit of USD 10.1 bn in December 2013: India Ratings

The country's current account deficit is likely to decline to 1.1-1.2 per cent of the gross domestic product in the third quarter, say rating agencies.

"We expect the current account deficit (CAD) to decline to 1.1 per cent of GDP in 3Q FY14 based on the trade deficit of USD 10.1 billion in December 2013," India Ratings and Research (Ind-Ra) said in a report today.

CAD is the excess of forex outflows over inflows.

India's exports grew 3.49 per cent in December to USD 26.3 billion, while imports dipped 15.25 per cent which helped narrow the trade deficit to USD 10.1 billion compared with USD 17.5 billion in the same period of 2012.

Overall, trade deficit for Q3 FY14 (October to December 2013) stood at USD 29.9 billion which was at the same level as in Q2 FY14.

"Given this, and with service export growth in Q3 expected to be at least similar to that in the second quarter, the current account deficit is likely to remain close to the level seen in Q2 FY14 which was 1.2 per cent of GDP," rating agency Crisil said.

For the April-December period, exports aggregated USD 230.3 billion and imports USD 340.3 billion while the trade deficit stood at USD 110 billion.

India Rating, however, said it is likely to revise its exports, imports and CAD numbers for FY14, given the 5.9 per cent growth in exports and 6.5 per cent contraction in imports during the first three quarters of FY14.

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