India Inc lauds dip in trade deficit; says will help cut current account deficit

Cheering the dip in trade deficit and double-digit growth in exports, India Inc has said it expects the current account deficit to narrow in the coming months and rupee to stabilise around 60 per dollar by the end of this year.

"Rising exports and significant reduction in trade deficit is indeed good news, and these reflect the dynamism of Indian exporters as well as  the positive impact of proactive support from the government," Ficci president Naina Lal Kidwai said.

As India's trade deficit has shrunk by over 60 per cent in the month of September and by about 13 per cent in the first half of this fiscal year, it would help contain the current account deficit, she added.

India's exports grew 11.15 per cent in September and imports declined 18.1 per cent amid a sharp fall in inward shipments of gold and silver, dragging the trade deficit to 30-month low of $6.76 billion.

"Going ahead, we expect CAD to fall significantly in Q3 and Q4 of 2013-14 on narrowing trade deficit. CAD is expected at around 3.8 per cent of GDP in 2013-14 compared with 4.8 per cent in 2012-13," said Suman Jyoti Khaitan, president of PHD Chamber.

"We expect rupee to recover further from its current level and consolidate at around 60 per dollar by December-end 2013, driven by factors such as improving capital flows, export-import ratio and overall current account balance."

The rupee has depreciated by about 15 per cent since April.

"The trade data gives positive signal to industry, as for the third successive month, there has been an upsurge in exports. This clearly indicates that Government measures for boosting exports are yielding positive results," said Sanjay Budhia, chairman of CII National Committee on Exports-Imports.

Imports of gold and silver plunged more than 80 per cent to $0.8 billion in September from $4.6 billion a year earlier. Oil imports declined by about 6 per cent to $13.19 billion.

"The performance registered in September is laudable. Deteriorating trade balance has been the main culprit behind pushing the current account deficit to unsustainable levels," Assocham secretary general D S Rawat said.

However, the government has to sincerely review the implementation of its industrial and trade policies.

Sustaining the performance registered in September holds the key, he added.

During April-September, gold and silver imports rose 8.7 per cent to $23.1 billion.