CAD in FY14 will be less than 3% of GDP: Rajan

Current capital flows sufficient to fund curent account deficit

The Reserve Bank of India (RBI) governor Raghuram Rajan said on Wednesday that the Current Account Deficit (CAD) in the current fiscal will be $56 billion translating to less than 3% of GDP. He said, capital flows was sufficient to fund current account deficit.

Rajan also announced that RBI will conduct an Open Market Operation (OMO) purchase of government bonds on Monday for a notified amount of Rs 8,000 crore to comfort the temporary strain in liquidity. The government bond market had anticipated the OMO in a scenario when RBI is auctioning government bonds every week for a notified amount of Rs 15,000 crore.

 

The yield on the 10-year benchmark government bond 7.16% 2023 which had climbed to 9.14% today dropped to 8.87% at 4:15PM. The yield had ended at 9.05%.

The RBI governor also said that majority of oil companys'demand for dollars was back in the market. He said that the RBI will continue to watch food inflation and the impact of future fuel price increases before deciding on interest rates, going ahead. 

He said, inflows through special swap window were at $18bn and the momentum for core inflation was also downward.

 

The rupee was quoting at Rs 63.42 compared with previous close of Rs 63.71 per dollar. Earlier during the day RBI had intervened through state-run banks to comfort the rupee. Rajan also said that  forex market is absorbing dollar demand of state-run oil marketing companies smoothly.

Majority of oil cos demand for dollars are back in the market: Rajan

Will continue to watch food inflation, impact of future fuel price increases before deciding on interest rates: Rajan