)
A rise in trade deficit to $10.56 billion in October compared to $6.76 billion in the previous month drew attention of some analysts, but most of them believed that the trend in trade imbalance is in sync with the government's aim to contain the current account deficit to $60 billion in 2013-14 against $88 billion in the previous year.
Some analysts had harped on the point that trade deficit rose in October compared to September, but equally true is the fact that it almost halved year-on-year from $20.21 billion.
India's current account deficit stood at $21.8 billion in the first quarter of 2013-14, which was 4.9% of GDP. At that time, trade deficit stood at $50.18 billion, according to the commerce ministry's estimates. There is always a slight difference in RBI and the commerce ministry's numbers. RBI's calculations put trade deficit at $50.5 billion in the first quarter.
However, trade deficit declined considerably to $29.94 billion in the second quarter of the current financial year, which will further narrow down the current account deficit. Recovery in the advanced world will also push up demand for services from India, particularly IT which would also lower CAD.
For CAD to be contained at $60 billion or roughly 3.1% of GDP in 2013-14, it needs to be contained to $38.2 billion in the next quarter. This roughly means an average of $12.73 billion a quarter, which would be a drastic cut compared to $21.8 billion in the first quarter of 2013-14.
"Lower merchandise trade deficit, along with a healthy growth in IT/ITes exports, create downside to our forecast of current account deficit at 3.9% of GDP for 2013-14," says a note by CRISIL Research.
Barclays was more specific, pegging India's current account deficit at below $60 billion in the current financial year.
State Bank of India chief economic adviser Soumya Kanti Ghosh pegged CAT at $55 billion in 2013-14. "We maintain a trade deficit at $170 billion for FY14, with a CAD at $55 billion, with downside," he said.
CAD soared to an all-time high of 4.9% of GDP in 2012-13.
