Moderates to 3.6% from 6.7% on quarterly basis
press trust of india
NEW DELHI, 27 JUNE: The Current Account Deficit (CAD) touched a record high of 4.8 per cent of GDP in 2012-13 on rising gold and oil imports, though still better than market expectation, bringing relief to the government which is struggling to arrest the sliding rupee.
CAD, which is the difference between the outflow and inflow of foreign currency, however, moderated “sharply” to 3.6 per cent of GDP in the last quarter of 2012-13 fiscal after it touched a historic high of 6.7 per cent in the October-December quarter. It was 4.4 per cent in the March quarter of 2011-12. The CAD was at $78.2 billion (4.2 per cent) in 2011-12 fiscal, but higher oil and gold imports pushed it up to $87.8 billion (4.8 per cent) last fiscal, RBI data said.
The central bank’s comfort level for CAD is 2.5 per cent of GDP. The finance ministry, meanwhile, said: “The short-term increase or decrease in CAD should not be a cause for either optimism or pessimism… We must look at the figure at the end of the year where the CAD stands,” it said.
“Markets have been over-reacting as we have seen in the case of prediction for CAD last year which were much higher than five per cent and we have seen that it is much lower than five per cent,” the ministry said.
The RBI said petroleum and gold constituted about 45 per cent of total merchandise imports during 2012-13. While petroleum import rose by 9.3 per cent, gold import declined by 4.8 per cent during the fiscal.For the full fiscal, gold import stood at $53.8 billion, down from $56.5 billion.
Import of petroleum in 2012-13 fiscal rose from $155 billion to $169.4 billion. According to the data, trade deficit in 2012-13 remained at an elevated level of $195.7 billion on account of a decline in merchandise exports by 1.1 per cent and rise in imports by 0.5 per cent on a year-on-year basis.
Decline in exports was due to fall in outbound shipment of manufactured items such as engineering goods, textiles, gems and jewellery and also primary products like iron ore and minerals.
The RBI said the CAD widened in 2012-13 on account of “burgeoning trade deficit, decline in net invisible earnings due to sharp increase in investment income payments and only a modest rise in net services receipts”. It said while the FDI inflows moderated during 2012-13, there was a surge in portfolio investment during the period.
Net foreign direct investment (FDI) moderated to $19.8 billion in 2012-13 from $22.1 billion in 2011-12. Net portfolio investment, however, rose to $26.7 billion in 2012-13 from $16.6 billion a year ago.