India Ratings and Research estimates that CAD, which is the excess of forex outflows over inflows, may have shrank to 1.1 per cent of the country's gross domestic product (GDP) in the third quarter ended December 31, 2013.
CAD had swelled to a record high of USD 88.2 billion or 4.8 per cent of GDP in 2012-13. India's exports rose 3.49 per cent to USD 26.3 billion in December 2013 from the same month a year ago while imports fell 15.25 per cent as the trade deficit narrowed to USD 10.1 billion from USD 17.5 billion in the year ago month.
"We expect the current account deficit (CAD) to decline to 1.1 per cent of GDP in 3Q FY14 based on the trade deficit of USD 10.1 billion in December 2013," India Ratings and Research (Ind-Ra) said.CRISIL also reportedly estimated CAD at near 1.2 per cent of GDP in Q3 FY 2014.
Improving CAD will not only lend support to the Indian rupee but will also provide some leeway to the Reserve Bank of India (RBI) to undertake monetary easing measures to support economic growth.
Dion Global Solutions Ltd.