CAD may rise to 5% of GDP in Dec qtr: CMIE

CMIE has said the current account deficit may climb to 4.9 per cent of the GDP.

Macroeconomic research agency Centre for Monitoring Indian Economy (CMIE) has said the current account deficit may climb to 4.9 per cent of the GDP,at USD 47 billion,in the December quarter.

“We expect the current account deficit (CAD) as a percentage of the GDP to close in on the 5-percentage mark at 4.9 per cent against an estimated 3.7 per cent in the September quarter and 3.1 per cent in the first quarter,” CMIE said in its monthly bulletin.

The agency said the CAD is likely to go up to USD 47 billion from USD 35.5 billion in the second quarter and attributed the sharp spike in the trade deficit to a steep fall in merchandise exports and a rise in imports.

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Exports are likely to touch only USD 70.4 billion in the December quarter,much lower than the USD 80 billion peak it saw in the June quarter.

The fall in exports is on account of weakness in theglobal economy,primarily in euro zone markets and the US,said the report,adding that the import bill continues to rise due to the upward spiral in crude prices and steep fall of the rupee.

After high double-digit growth in the previous months,exports rose marginally to USD 22.3 billion in November,while inward shipments rose to USD 35.9 billion,leaving a trade deficit of US 14 billion.

Going forward,the agency expects the moderation in imports to be slower than that of exports. This would result in a trade deficit above USD 40 billion in the fourth quarter.

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“For the full year,we see the trade deficit to top USD 163 billion. Of this,about USD 94 billion will be offset by the invisibles earnings,leaving a current account deficit of USD 69.8 billion,or 3.7 per cent of the GDP,for the year,” the report said.