India's Dangerous Zone: Current account deficit at all-time high of 6.7%

[kawaraj]

India's current account deficit (CAD) touched a record high of 6.7% of GDP in the October-December quarter, mainly on account of widening trade gap.

The CAD, which is the difference between inflow and outflow of foreign currency, "widened from 5.4% in Q2 (July-September) to a


record high of 6.7% of GDP in Q3, driven mainly by large trade deficit", Reserve Bank of India said in its report on Balance of Payments.
The report said while the merchandise exports did not show any significant growth during the third quarter ending December 2012, the imports shot up by 9.4%, spurred largely by oil and gold imports.

The trade deficit, the RBI said, widened to $59.6 billion in third quarter, up from $48.6 billion in the corresponding quarter a year ago.

Finance minister P Chidambaram in his budget speech had said: "my greater worry is the CAD". He attributed the rise in the CAD to factors like excessive dependence on oil imports, the high volume of coal imports, passion for gold and slowdown in exports.

Current account deficit at all-time high of 6.7% in Q3 - Hindustan Times


This is what happened in Thailand during Asia financial Crisis.

 

[Pandora]

It is not that bad. They can recover either with increase in exports or by slashing down imports.

 

[Shardul.....the lion]

We import huge amount of Gold and Petroleum products resulting in Fiscal deficit.

 

[kawaraj]

It is not that bad. They can recover either with increase in exports or by slashing down imports.

Unless currency is the single element in such scenario. If that holds true, Thailand could resort to it too.

 

[Pandora]

Unless currency is the single element in such scenario. If that holds true, Thailand could resort to it too.

Thailand and india cant be compared in terms of economy as indian economy is massive. It would be a worry for India if this trend continues for next couple of years otherwise it is no big deal as of now.

 

[INDIC]

Unless currency is the single element in such scenario. If that holds true, Thailand could resort to it too.

Indian economy is already out of the danger of getting junk ratings by rating agencies. Did you read the timing in the news you posted.

India's current account deficit (CAD) touched a record high of 6.7% of GDP in the October-December quarter, mainly on account of widening trade gap.

 

[neehar]

i hope people can understand simple english here.the article says

"India's current account deficit (CAD) touched a record high of 6.7% of GDP in the October-December quarter, mainly on account of widening trade gap."

that just belongs to october december quarter.heres the latest

CAD to show improvement in fourth quarter: Rangarajan - The Hindu


Having hit a record 6.7 per cent of GDP in December quarter, India’s current account deficit is expected to show some improvement in the last quarter of this fiscal on account of likely uptick in exports, Prime Minister’s Economic Advisory Council Chairman C. Rangarajan said on Friday.

The current financial year, he hoped, would end with a CAD of little over 5 per cent.

“The CAD (in December quarter) was higher than expected... But I believe CAD will come down during the fourth quarter (January-March). For the year as a whole, I expect CAD to be a little higher than 5 per cent,” Mr. Rangarajan told PTI.

CAD widened to a historic high of 6.7 per cent of GDP in December quarter to $32 billion on account of surge in oil and gold imports, besides weak exports. It was at $20 billion (4.4 per cent of GDP) in the corresponding quarter of last fiscal. CAD is the difference between inflow and outflow of foreign funds.

Even at over 5 per cent, the CAD would be nearly double the mark of 3 per cent during 1991 — the year when India faced the foreign exchange crisis.

Ratings agency Crisil’s chief economist D.K. Joshi said the higher CAD could weaken the rupee. However, it is expected to come down as a whole, he said.

Current account deficit at all-time high of 6.7% in Q3 - Hindustan Times


This is what happened in Thailand during Asia financial Crisis.

did this happen too??
http://www.thehindu.com/business/Economy/current-account-deficit-rises-to-54-in-q2/article4497799.ece

It is not that bad. They can recover either with increase in exports or by slashing down imports.

that belongs to december we've already recovered to 5.4% and still improving

We import huge amount of Gold and Petroleum products resulting in Fiscal deficit.

gold,fertilizers and coal are crucial reaasons though we also import petroleum we export most of the byproducts

 

[joekrish]

End of story OP.

 

[Viet]

What is the estimation of Exports and Imports of India this year?

 

[neehar]

What is the estimation of Exports and Imports of India this year?

sorry..not in a mood to read now. its a long document hope u get what u want..
http://indiabudget.nic.in/es2012-13/echap-07.pdf

 

[neehar]

What is the estimation of Exports and Imports of India this year?

doubling our exports to $500 billion in next 3 years
http://commerce.nic.in/ann/StrategyPaper.pdf

 

[xuxu1457]

India import 800tons gold every year, worth more than 41billion$, every year, so this part should be take out

 

[graphican]

Thailand and india cant be compared in terms of economy as indian economy is massive. It would be a worry for India if this trend continues for next couple of years otherwise it is no big deal as of now.

Larger economies are slow to move in either direction. As of now CAD is widening with greater rate than before.

A question from economists in the forum:

If India's Net Imports are greater than Net Exports, how is Indian Economy growing at "5.6%" ?

 

[Yogi]

India import 800tons gold every year, worth more than 41billion$, every year, so this part should be take out

The problem is that its around the world its only India where people by so much gold for domestic use n International standards take gold in account for calculating CAD n the won't make an exception for India.

As ther some estimates the gold reserves of Indian households is a wooping 18,000 tonnes(although i won't be surprised if it turns out even more)...

 

[xuxu1457]

The problem is that its around the world its only India where people by so much gold for domestic use n International standards take gold in account for calculating CAD n the won't make an exception for India.

As ther some estimates the gold reserves of Indian households is a wooping 18,000 tonnes(although i won't be surprised if it turns out even more)...

In the han of Indian, no difference with in the hand of India, all wealth