Current account deficit may decline to 0.9% of GDP

The current account deficit for 2014-15 is expected to narrow down further to 0.9 per cent of gross domestic product because of subdued external demand and cooling commodity prices, a report said on Tuesday.

According to the research report by leading public sector lender State Bank of India, CAD is expected to narrow down further to below $24 billion (0.9 per cent of GDP) in 2014-15.

Going forward, the upturn in global demand is not visible in any near future and 2015-16 may also see the CAD widening marginally to 1 per cent of GDP.

India's current account deficit declined sharply from 4.8 per cent of GDP in 2012-13 to 1.7 per cent in 2013-14.

Though the last financial year ended with missed export target, but there is optimism about the new Foreign Trade Policy targets, the report said.

Merchandise trade deficit for the year ended March 31, 2015, widened by $1.3 billion at $137 billion despite the windfall gains from lower crude imports.

Government unveiled the much-awaited FTP for 2015-20 on April 1, 2015.

In the next five years, the trade policy aims to increase exports of merchandise and services from $465.9 billion in 2013-14 to around $900 billion by 2019-20 and to raise India's share in world exports from 2 per cent to 3.5 per cent.

To achieve the target, exports need to grow by about 15 per cent in nominal dollar terms every year, said the report.

According to SBI, comparing the target with the actual performance of the sector, it seems to be ‘achievable’ given possible recovery among trade partners and gathering

competitiveness of the domestic product and currency in the international market.