CAD to be closer to 1.3% of GDP in FY16: India Ratings

The current account deficit (CAD) for the current fiscal is likely to come in close to 1.3 per cent of the GDP, India Ratings and Research (Ind-Ra) said today.

CAD narrowed to 1.4 per cent in April-December, from 1.7 per cent in the corresponding period of 2014-15.

“Ind-Ra expects the CAD to come in close to 1.3 per cent of GDP in FY16,” the agency said in a statement.

CAD, difference between inflow and outflow of foreign exchange, came in at 1.3 per cent in 2014-15, 1.7 per cent in 2013-14 and a record high of 4.8 per cent of GDP in 2012-13.

For the third quarter of current fiscal, CAD was at USD 7.1 billion (1.3 per cent of GDP), sequentially lower than USD 8.7 billion (1.7 per cent of GDP) in second quarter.

It was also lower than USD 7.7 billion (1.5 per cent of GDP) in third quarter of last fiscal.

“Ind-Ra expects improved performance in FDI to continue as India’s economic growth improves gradually in 2016-2017 compared to that in 2015-2016. The focus on Make in India will attract larger and more stable FDIs,” it said.

In the October-December quarter of fiscal, forex reserves increased by USD 4.1 billion mainly because of higher FDI flows under the capital account.

The net receipt under the capital account rose to USD 10.5 billion in third quarter, from USD 8.6 billion in second quarter.