Chidambaram's golden chop cuts CAD, bails out rupee

July-September figures show a sharp decline in the CAD.

Mumbai: A steep decline in gold imports and an increase in exports helped India sharply narrow the current account deficit (CAD) for the July-September quarter. The CAD is the difference between outflow and inflow of foreign exchange.

The figure stood at 1.2 per cent of the GDP, against 4.9 per cent of GDP in the April-June quarter.

Figures released by the Reserve Bank of India said that the CAD had narrowed sharply to $5.2 billion from $21 billion for the same period last year.

Encouraged by better-than-expected growth in the July-September quarter, finance minister P. Chidambaram, who had led the crackdown on gold imports, expressed confidence that the economy would expand by 5 per cent. He said the fiscal and current account deficits would remain within limits.

“We are going through a period of stress but there is a ground for optimism... we hope things will become better in the second half of the current fiscal (2013-14),” he said.

The lower CAD, it said, was primarily on account of a decline in the trade deficit as merchandise exports picked up and imports moderated, particularly gold imports.

On a balance of payment basis (BoP), there was a significant 11.9 per cent growth of merchandise exports to $81.2 billion. These exports were in textiles, leather and chemicals.

On the other hand, the RBI said that merchandise imports had declined by 4.8 per cent at $114.5 billion. This was primarily led by a steep decline in gold imports at $3.9 billion compared to $16.4 billion in Q1 of 2013-14 and $11.1 billion in Q2 of 2012-13.

Exports of net services, mainly of‘computer services’ at $ 18.4 billion recorded a growth of 12.5 per cent in Q2 of 2013-14 (y-o-y) and boosted the net invisibles during Q2 of 2013-14.

Net outflow of dollars by MNCs and others on account of primary income was higher at $6.3 billion in Q2 of 2013-14 than that in the preceding quarter.

( Source : dc )
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