Throwing in a pleasant surprise for economy watchers, Rana Kapoor, Assocham President and Managing Director and CEO of YES Bank, said India’s current account deficit this fiscal may end below $50 billion.
This forecast is substantially lower than the $70 billion CAD projected by the Government for the current fiscal.
Kapoor’s optimism of a much lower CAD stems from his expectations of sharp contraction in imports, primarily due to the recent initiatives of the Government.
EXPORT PUSH
To alleviate the CAD problem, there is a need for the Government to go all out to push exports, Kapoor told
In this regard, he suggested that the Government should focus on creating agri-export zones in the country.
The quantum of refinance made available by RBI to banks for supporting export should be increased (from existing 50 per cent to 100 per cent).
SOVEREIGN BONDS
The Assocham President was not opposed to a sovereign bond issuance, but felt that one would have to wait for an opportune time before going for it.
The Centre is looking at several options including a sovereign bond issue, NRI bonds to fund the burgeoning CAD.
India’s CAD in 2012-13 stood at $ 88 billion, which was comfortably financed through capital flows of $90 billion.
Assocham will do a SWOT (strength, weakness, opportunities and Threat) analysis of the Finance Minister’s 10 commandments presented to Parliament recently to restore health of the economy.
Referring to the impasse around coal and iron ore mining due to judicial intervention, Kapoor said that India should look to become net exporter of minerals.
While judicial intervention is fine, it should not jam the brakes on economic growth.
BULLISH ON INDIA
Kapoor expressed confidence that the Indian economy will bounce back and felt that the negative perception was perhaps overplayed.
“India still provides the best return of equity in the world.
“It is a long-term market. The growth engines are on. The only thing is the gears have changed.
“We are certainly not on the reverse gear or neutral gear.”
DISINVESTMENT
Kapoor felt that disinvestment target of Rs 40,000 crore would be easily met even as the market conditions were not positive.
“We should look at resolving existing issues like Balco and Hindustan Zinc.
There is also the SUUTI holdings that could be unlocked,” he said.
He also said that the Government should go ahead with exchange traded fund (ETF) product on shares of public sector enterprises.