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The current account deficit (CAD), which has been a serious concern for policymakers in the recent past, has shown improvement, according to the RBI.
India’s trade deficit during April-December 2013 was 25 per cent lower than last year. Consequent to the lower trade deficit, CAD has declined from 4.9 per cent of gross domestic product (GDP) in the first quarter of the current fiscal to 1.2 per cent of GDP in Q2 of 2013-14.
“The full-year CAD is likely to be below 2.5 per cent of GDP,’’ the RBI said in the Macro-Economic and Monetary Developments released by the RBI in the third quarter review 2013-14 on Tuesday.
This, along with recouping the reserve loss due to the Reserve Bank’s swap windows, helped mitigate the external sector risks.
However, , there is no scope for complacency and the breather provided by a reduction in the immediate risks needs to be used to develop the resilience of the external sector over the medium-term, it added.
CAD measures a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports.
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