CII president expresses concern over current account deficit

A large Current Account Deficit above the comfort level of 2.5 percent is always matter of deep concern, said Confederation of Indian Industry (CII) president Chandrajeet Banerjee.

In a statement, Banerjee said: "India's current account deficit has been well above the comfort level for more than a year and poses a serious risk on multiple fronts. While a dampening of demand in the economy has led to imports declining and thereby a moderation in the CAD figures for Q4 of FY 13, this is not a desirable or a sustainable route for managing CAD."

He added: "The high level of CAD puts pressure on the rupee and this is very much evident in recent months where the rupee is showing a high degree of volatility. In the immediate future all possible measures of financing the deficit have to be explored, however, the objective should be to ensure that CAD is brought under control."

"Modes of financing are not the final solution. CII believes that the Government and the RBI are acutely aware of the problems on this front. Admittedly, the global economic scenario is not particularly upbeat and slowdown in Europe is constraining demand, but that notwithstanding, we have to do everything possible within the policy domain to ensure that foreign exchange inflows go up," Banerjee said.

"Boosting exports is a key part of this policy action. Similarly, efforts should be made to introduce attractive financial instruments to divert household savings in non-productive assets like gold," Banerjee added.

Another important aspect to note is that quarterly data might reflect that CAD has reduced sharply from Q3 to Q4. However, it might be premature to cheer since it is too early to conclude that this is the general trend in CAD.