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Rise in CAD-GDP ratio due to slower GDP: RBI
The Reserve Bank of India in its monthly bulletin for March has said that the rise in India's Currenct Account Deficit (CAD) to GDP ratio was on account of slower growth in GDP.
"Rise in CAD to GDP ratio was also partly due to slower growth in GDP and rupee depreciation. India's CAD as a percentage of GDP deteriorated to an all time high of 5.4 per cent in Q2 of 2012-13 on account of widening of trade deficit and slower growth in invisibles," the RBI has said.
India's central bank also noted that a steeper decline in exports growth (12.2 per cent - YoY) as compared with imports growth (4.8 per cent - YoY) led to widening of trade deficit.
"Trade deficit widened to US$ 48.3 billion during Q2 from 44.5 billion during the corresponding quarter of the previous year, the RBI Monthly bulletin has stated.
"While net services receipts registered reasonable increase, net invisibles earnings during the quarter could finance only a lower proportion of trade deficit as net ‘primary and secondary' income flows were relatively smaller. Consequently, the CAD worsened to US$ 22.3 billion in Q2 of 2012-13 as compared to US$ 16.4 billion in the preceding quarter and US$ 18.9 billion in Q2 of 2011-12," the bulletin states.
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