For improvement to sustain in FY15, the govt has to retain gold curbs and keep currency from appreciating
One thing India can cheer about this year is the improvement in the current account deficit (CAD), on the back of a clamp on gold imports and a moderate pick-up in exports. Between April 2013 and January 2014, imports contracted $32 billion, while gold imports declined $20 billion compared to the previous year. For the full year, government expects CAD to be $35 billion. An additional savings of $10 billion came from lower capital goods imports, thanks to weak investments. Lower crude oil prices have also come to the rescue during the financial year, say economists. Is this improvement in CAD sustainable?
Granular data on India’s external trade indicate much of the improvement is due to lower imports of gold and capital goods, says Kotak Institutional Equities. Gold imports fell from $7.7 billion in May 2013 to $1.4 billion in January this year. The monthly run rate of gold imports in value terms has remained above $5 billion since January 2012.
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