CAD in Q1 to be much higher than 3.7%: Montek

Expectation is country won't see any real improvement till the end of the second quarter, says Planning Commission deputy chairman

Planning Commission Deputy Chairman Montek Singh Ahluwalia on Saturday said for the quarter ended June 2013, the country’s current account deficit (CAD) was likely to be much higher than 3.7 per cent of gross domestic product (GDP), projected for the entire financial year.

“My expectation is we won’t see any real improvement till the end of the second quarter (July-September) this year,” Ahluwalia said at a press conference. He, however, added containing CAD at 3.7 per cent this financial year was possible because of the curtailment in gold imports.

In 2012-13, CAD stood at a record $88 billion, or 4.8 per cent of GDP. Finance Minister P Chidambaram has said this financial year, it would be restricted to $70 billion.

MONTEK SPEAK

• Containing CAD at 3.7 per cent this financial year is possible because of the curtailment in gold imports
• The currency’s depreciation might be good for the economy to an extent, as this would help increase the country’s export competitiveness and discourage imports
• The economic situation hasn’t reached a point where outside help was warranted, such as from the International Monetary Fund
• BRICS nations might reach a consensus on creating a $100-billion currency reserve fund to help ease short-term liquidity pressures and safeguard financial stability of major emerging economies
• G20 is expected to take keen interest in maintaining a robust multilateral trading system and press for measures to resist protectionism

Attributing the rupee’s fall to the high CAD and the US Federal Reserve’s plans to taper quantitative-easing measures, Ahluwalia said the currency’s depreciation might be good for the economy to an extent, as this would help increase the country’s export competitiveness and discourage imports.

Asked whether the government would approach multilateral institutions such as the International Monetary Fund (IMF) for assistance, he said the economic situation hadn’t reached a point where outside help was warranted, adding the central bank’s foreign exchange of $278.6 billion were adequate.

On the coming G20 Leaders’ Summit in St Petersburg on September 5-6, to be attended by Prime Minister Manmohan Singh, Ahluwalia said G20 was expected to take keen interest in maintaining a robust multilateral trading system and press for measures to resist protectionism.

He added on the sidelines of the G20 summit, BRICS nations (Brazil, Russia, India, China and South Africa) might reach a consensus on creating a $100-billion currency reserve fund to help ease short-term liquidity pressures and safeguard the financial stability of major emerging economies.