CAD may have fallen to 4% in Q4, says Rajan

Written by feBureau | New Delhi | Updated: May 1 2013, 09:26am hrs
Advocating more reforms to help the economy turn around, chief economic adviser in the finance ministry, Raghuram Rajan, said on Tuesday that the current account gap may have shrunk to less than 4% of the GDP during January-March 2013 from a record high of 6.7% in the previous quarter as global commodity prices softened and exports started picking up.

Warning that the economy was "not out of the woods yet", the former chief economist of IMF said though corporates are still investing in small doses, it will take some time for the big projects to pick up even after they were cleared by the cabinet committee on investment. Though widening of the two deficit CAD and fiscal deficit in recent years has further increased the stress on Asia's third largest economy, Rajan sounded optimistic on reining in both the deficits in coming years. The CAD during 2013-14 could be 5% and the target will be to bring it down to 4% in 2014-15, he said. "The CAD in Q4 will be significantly below 6.7% (of Q3) and below 4%.

Admitting that many power projects have been stalled or delayed just for the impasse on fuel linkage, he said the government decision on coal price pooling was "not more than a week away".

While reiterating that the "red lines" drawn on the fiscal deficit won't be crossed, he said the deficit for 2012-13 could come in at "less than 5.2%" of GDP. The Budget has projected fiscal deficit at 4.8% for 2013-14.

Insurance Bill will lift sentiment

Amid the logjam in Parliament and a worrying economic growth, the government's chief economic adviser Raghuram Rajan on Tuesday pitched for an early passage of the insurance Bill to send a strong signal to foreign investors that India was firmly rooted to the path of reforms.

The Insurance Bill that proposes a hike in FDI limit to 49% from the present 26% was listed for debate and passage in the Budget session. "We have laid a path of reform. On the national perspective, the sooner it is passed the better," Rajan said at a select media briefing. "I won't say growth will stop. I am not alarmist. It would have been a signal to foreign investors and aided growth," he said referring to the

insurance Bill.