“We do not expect the tapering to really cause any big disruptions in India’s external sector and the rupee is expected to remain range bound. The position with regard to current account deficit (CAD) is quite stable and is likely to remain so,” Assocham Secretary General D S Rawat said. “The positive side to the tapering phenomenon is that the US economy is improving which will enhance potential for exports to the US. It will provide a fillip to the export sector which in turn would further improvement in CAD,” Rawat added. The US Federal Reserve had first in May hinted it will taper bond purchases, sending the markets world over in a tizzy. India’s current account gap narrowed sharply to $ 5.2 billion, or 1.2 per cent of GDP, in the July-September quarter of 2013-14 on the back of turnaround in exports and decline in gold imports.
Both the government and RBI are expecting the CAD to be below $ 56 billion in the current fiscal compared to the record high of $ 88.2 billion, or 4.8 per cent of the GDP last fiscal. The current account deficit (CAD), the difference between outflow and inflow of foreign exchange, was $ 21 billion, or 5 per cent of the GDP, in the second quarter of last fiscal. The government has taken several steps, including hike in gold import duty to 10 per cent and restrictions on import of gold bars and medallions, to restrict CAD. It has also taken measures to boost exports, taking advantage of depreciating rupee. (PTI)