CAD at 1.2-1.3 pc of GDP in FY18

CAD increased to $14.3 billion, or 2.4 per cent of gross domestic product (GDP), in the first quarter of the current fiscal from $0.4 billion in the year period. In FY17, CAD was at $15.2 billion, or 0.7 per cent of GDP. “With the size of the current account deficit in the first quarter nearly as high as the FY17 level of $15 billion, we expect the FY18 deficit to double to around $30-32 billion or 1.2-1.3 per cent of GDP,” rating agency Icra said in a report here. 

In general terms, CAD refers to the difference between inflow and outflow of foreign exchange that has a bearing on exchange rate. The increase in CAD in the first quarter was on account of higher trade deficit, which stood at $41.2 billion. The rise in the trade deficit was brought about by a larger increase in merchandise imports relative to exports. 

“The sharp surge in the current account deficit in April-June quarter relative to Q1 FY17 comes as no surprise, with the spike in gold imports prior to the introduction of GST responsible for half of this uptick,” the report said. The lagged impact of rupee appreciation was partly responsible for a faster rise in non-oil non-gold imports relative to exports.