Lower Crude Oil Price To Ease India's CAD: Report

As per the SBI Ecowrap report, lower crude oil prices that have receded sharply to an extent last seen 4 years back, the country's CAD i.e. the difference between foreign currency outflows and inflows is likely to settle at a better trajectory. CAD for 2018-19 is expected to be at 2.6 per cent of the gross domestic product (GDP).

"The recent decline in oil prices might compress the CAD by around $5 bn-$6 bn from our estimates of $78 bn in current fiscal. This will imply CAD settling down at 2.6 per cent of GDP (previously 2.8 per cent). Additionally, if crude averages $65 and rupee stays at 70, then petrol and diesel prices could fall further on average by Rs 4 or more," the report said.

From 0.6% in 2016-17, CAD has jumped to 1.9% in the year 2017-18 and then for the current fiscal it is expected to scale to 2.8%.

"This implies that diesel prices could head well below Rs 70 per litre and petrol well below Rs 75. It is thus imperative that we also keep exchange rate stable. Inflation is likely to hit 2.7-2.8 per cent in the next couple of months."

"There will also be an additional Rs 14,000 crore surplus tax collections under customs duty. In addition to this, the government is expected to add another Rs 20,000 crore to its kitty from evaded taxes," the report said.

Also, as per the report, direct tax collection is also estimated to be higher than budgeted by as much as Rs. 20,000 crore.

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