CAD dips to 1.7% in Q1 on narrowing trade deficit

ENS Economic Bureau | New Delhi | September 2, 2014 1:16 am

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Imports moderated by 6.5 per cent to $116.4 billion in the period under review from a 4.7 per cent growth in the first quarter of 2013-14.

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Improving the country’s chances for a rating upgrade, the current account deficit narrowed sharply to 1.7 per cent of the GDP or $7.8 billion in the first quarter of 2014-15.

While the data, released by the Reserve Bank of India, showed a significant improvement in the CAD from the $21.8 billion or 4.8 per cent of the GDP in the first quarter of last fiscal, it was higher than the deficit of $1.2 billion (0.2 per cent of the GDP) in the fourth quarter of 2013-14.

“The lower CAD was primarily on account of a contraction in the trade deficit contributed by both a rise in exports and a decline in imports,” the RBI said in a statement, adding that there was a modest rise in non-gold imports in the April to June quarter of 2014-15. According to the data, while gold imports fell by a steep 57.2 per cent to $7 billion in the first quarter of the fiscal, non-gold imports rose by 1.3 per cent.

Overall, trade deficit contracted by about 31.4 per cent to $34.6 billion in the first quarter of the fiscal, as against $50.5 billion in the corresponding period a year ago. Meanwhile, exports rose by 10.6 per cent in the Q1 of 2014-15 to $81.7 billion as compared to a 1.5 per cent decline in the same period a year ago. Imports moderated by 6.5 per cent to $116.4 billion in the period under review from a 4.7 per cent growth in the first quarter of 2013-14.

The CAD, the difference between the inflow and outflow of foreign currency, had touched a record high of $87.8 billion (4.8 per cent) in 2012-13 as gold imports soared. But with stringent checks on import of the metal, it eased to $32.4 billion or 1.7 per cent of the GDP last fiscal.