Current account deficit (CAD) was likely to improve in the short-term owing to the falling crude oil prices, coupled with a dip in gold imports, Kotak Mahindra Bank Executive Chairman and Managing Director Uday Kotak said today.
“The CAD is likely to improve in the short run as oil prices are falling. Also, gold import is expected to be lower than last financial year,” he said addressing a Kotak BFSI (banking, financial services and insurance) conference here. He, however, said though these factors would support the CAD situation in the short term, the government had to come up with steps to reduce the widening trade deficit in the long run.
CAD was around four per cent of GDP in the last financial year, which was just 2.5 per cent in the previous financial year. At present, financing of CAD looks difficult due to the falling capital inflows owing to the global economic turmoil. Referring to the European situation, Kotak said there is less possibility of Greece exiting the 17-member monetary union.
“At some level, Germany will give in to save the Euro zone from breaking up,” he said, adding solutions like a euro bond issue may come up in the future.
Kotak also said he is not negative on the markets and the rupee depreciation is helping certain sections of investors. “The competitive intensity of some exporters have improved drastically due to the rupee fall, and they should take this opportunity to grow as much as possible as such events don’t come in often,” he added.