India's CAD surged to a record high of 4.8 per cent of GDP or USD 88.2 billion in FY 2012-13. The government's targeted CAD for this fiscal is USD 70 billion equivalent to 3.8 per cent of GDP.
CAD stood at 4.9 per cent of GDP at USD 21.8 billion in Q1FY14; below the expected USD 23 billion.
Falling imports of precious metals such as gold owing to RBI restrictions have helped contain the CAD. At the same time, exports have picked up amid an improvement in the global economy.
With the US central bank likely to delay tapering of QE, such a move is set to benefit emerging market assets and support foreign fund inflows and the Indian rupee, helping to stem the CAD.
"Taper is delayed. Secondly the CAD looks good. By the time taper happens, we are going to look in much better shape. So the threat on the rupee will be much less as and when the taper happens", Ahluwalia added.
Dion Global Solutions Ltd.