The current account deficit (CAD) may fall to below four per cent in the fourth quarter of 2012-13, Chief Economic Advisor Raghuram Rajan said, pinning hopes on lower gold prices and softening of crude prices.
“If you look at the fourth quarter, it is going to be significantly below 6.7 per cent and, perhaps, below four per cent. However, there will be volatility in the number for the year,” Rajan said while talking to reporters here on Tuesday. CAD is the difference between the outflow and inflow of foreign currency.
With gold imports declining and crude prices softening, Rajan felt that the country should target a CAD of below five per cent in 2013-14, and below four per cent in 2014-15. During the first 11 months (April-February) of 2012-13, gold imports have fallen to $50.63 billion from $56.32 billion in 2011-12. Crude oil prices are hovering between $100-105 a barrel.
Rajan said there was need to attract more long-term foreign funds and increase exports over the medium term.
“What will help us (to bring down CAD) is that exports seem to be picking up once again and commodity prices are low, especially of oil. Oil imports are at $170-180 billion. So, even a 10 per cent decline in these will be a substantial benefit for us in terms of CAD,” he said.
On increasing investments and putting the economy back on the high growth path, he said the Government would continue to make ‘doing business’ easier by reducing transaction costs and doing away with hurdles in land acquisition.
“We are not out of woods yet. We are trying to revive the economy, and there are tentative signs that the economy is strengthening. There are still some worries. We cannot become complacent. If we need to get the economy back on track, we have to keep doing some of these things,” Rajan said.