Economists predict improvement in CAD situation in FY2013-14

Economists predict improvement in CAD situation in FY2013-14Barclays economists have predicted that India's current account deficit (CAD) situation would improve in the current financial year, a projection that is expected bring cheer to the struggling government's face.

The Congress-led UPA government has along been struggling to deal with the problem of huge CAD, which swelled to 4.8 per cent of the country's gross domestic product (GDP) in the last financial year.

Now, Rahul Bajoria and Siddhartha Sanyal, two economists at Barclays, have slashed their deficit projection of India's FY2013-14 from their previous estimate of nearly $80 billion to nearly $68 billion.

The economists added that the deficit could drop even lower to $57 billion under an optimistic scenario.

In a research note, they said, "We have cut our 2013-14 deficit forecast to around $68 billion (from around $80 billion)... under an optimistic scenario, we think a current account deficit of $57 billion could be possible."

It may be noted here that the government recently announced a slew of measures, such as discouraging imports of non-essential goods from foreign markets, to tackle huge CAD.

The two economists also made a positive prediction about the rupee, which recently slipped to its record low of more than 65 per US dollar. Bajoria and Sanyal predicted that the partly-convertible currency would remain strength to around 60 per US dollar by March.