RBI sees signs of improvement in current account deficit

The Reserve Bank of India (RBI) on Wednesday said the current account deficit (CAD) is likely to improve this fiscal from the record low of 4.2% last year, going by the numbers for the first three months.

The Reserve Bank of India (RBI) on Wednesday said the current account deficit (CAD) is likely to improve this fiscal from the record low of 4.2% last year, going by the numbers for the first three months.

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“It is possible that this year the CAD might be lower than it was last year,” said Duvvuri Subbarao, governor, RBI told analysts on a post-policy conference call, adding the non-oil trade deficit has improved in the first quarter.

“We need to bring it down, the challenge is to bring the CAD down in the medium- and short-term to be able to finance it with relatively stable inflows,” he said. While fiscal deficit touched a record 5.9% in FY12 against a target of 4.6%, CAD hit a 30-year low of 4.2% in FY12, and 4.5% of GDP in Jan-March 2012. CAD was only 2.7% of GDP in FY11.

CAD is the difference between total imports and inward transfers and exports and outward transfers.