CAD to fall below 3.8%; says Montek Singh Ahluwalia

Current Account Deficit is likely to be lower than the projection of 3.8 per cent of the GDP and India will be in a better position to neutralise the impact of the tapering of monetary stimulus by the US Fed, Planning Commission Deputy Chairman Montek Singh Ahluwalia has said. The Current Account Deficit is the difference between inflow and outflow of foreign exchange. During 2012-13, the CAD was at all-time high of 4.8 per cent of GDP or US $ 88.2 billion. Government proposes to bring it down to US $ 70 billion or 3.8 per cent of the GDP. Ahluwalia said - "Taper is delayed. Secondly the CAD looks good. By the time taper happens, we are going to look in much better shape. Now rupee has come to a much more maintainable position. So the threat on the rupee will be much less as and when the taper happens. So we will be in a better situation (next year)." Tapering refers to gradual withdrawal of monetary stimulus by the US Federal Reserve. Asked about the Planning Commission Member Saumitra Chaudhuri's projections that CAD will be 2.5 per cent or range between US $ 40-45 billion, Ahluwalia said: "It is not a Planning Commission's estimate. This is his personal estimates." However supporting Chaudhuri's estimates, he said: "If you view the growth grooming because of agriculture and its impact on non-agriculture demand which is not very import intensive then current account deficit may be lower." During the first quarter this fiscal, Indian economy grew at 4.4 per cent lower than 4.8 per cent in the previous quarter. Economy has grown at a decade low rate of 5 per cent last fiscal. The government expects the growth to range between 5 to 5.5 per cent this fiscal. Planning Commission (India): The Planning Commission is an institution in the Government of India, which formulates India's Five-Year Plans, among other functions. After India gained independence, a formal model of planning was adopted, and accordingly the Planning Commission, reporting directly to the Prime Minister of India was established on 15th March 1950, with Prime Minister Jawaharlal Nehru as the chairman. The Planning Commission does not derive its creation from either the Constitution or statute, but is an arm of the Central/Union Government. What: CAD to fall below 3.8% this Fiscal year Who: Montek Singh Ahluwalia When: 20th October 2013