India's Current Account Deficit To Narrow To 3.5%

Goldman Sachs Projects 6.5% GDP By 2013; Upgrades India To Overweight

 
on November 29 2012 4:38 AM
Indian Economy
India To Grow At 6.5 percent in 2013 Sreeja VN/ Ibtimes

India’s current account deficit is likely to narrow to 3.5 percent from the current 4.5 percent by the end of the fiscal year, Prime Minister's Economic Advisor Council Chairman Dr C Rangarajan has said.

Speaking to the reporters on the sidelines of a function in Chennai Wednesday, he said that the high current account deficit was a major challenge for the economy and there was an imperative need to bring it down to the moderate levels.

"The current account deficit is remaining at high level and we should work towards getting the current account deficit to more moderate levels. We should aim at the current account deficit of 2.5% of the GDP down from the current 4.5%. But in the current year, perhaps, the current account deficit may be around 3.5% of the GDP," Rangarajan rued, according to the Press Trust of India (PTI).  

India’s current account deficit has come down mainly because of a decline in gold imports due to the lower demand in the domestic market owing to the high prices. He pointed out how high inflation remained a major concern for the economy, which is expected to grow at a modest 5.6 percent this year.

"In order to get back to the high level of growth, we need to address some major macroeconomic concerns -- first is to tame inflation. We had three years of high inflation. We need to bring it down to more comfortable levels. Second, the process of fiscal consolidation must continue and we should work towards getting the fiscal deficit down to three per cent of the GDP over the next five years," he said.

The Finance Ministry has announced a fiscal consolidation road map to achieve the targets after much criticism for policy inaction from the industry and international rating agencies.

Goldman Sachs Projects India To Grow 6.5%

In a separate development, Goldman Sachs, in a report released Thursday, said the Indian economy was expected to grow 6.5 percent in 2013 and 7.4 percent in 2014 aided by economic reforms mooted by the government and an increase in external orders.

The investment bank also upgraded India to an “overweight” ranking from a “market-weight” ranking, citing growth recovery and a possible moderation in inflation rates.

"Reform initiatives and changes in government leadership this fall have created a sense of optimism among the domestic investor base for the first time in over a year, and the risk of policy missteps in 2013 has been lowered," Goldman Sachs stated in a report.

According to a Reuters’ poll, India's economy expanded at the slowest pace (5.4 percent) in three years in the quarter ending Sept. 30.

Share this article