High CAD pinches again
The recently released numbers by RBI on Current Account Deficit (CAD) for the period from October- December 2012 don’t seem to cheer up anyone in the country.
The numbers were far worse than the expectations of anyone and added more troubles for the government than anyone else. The number stands at 6.7% for the third quarter of 2012.
Despite the strict measures to curb the ballooning CAD, the situation doesn’t seem to be getting any better for at least some time now.
The Balance of Payment (BoP) was recorded at $ 32.6 billion and the number is considerably higher to what it was in the same period a year back. It augmented by around 61% and it is the biggest sign of worry.
It is very clear that any reduction in the imports of oil and gold would require a Herculean task by the government and inspite of increasing import duty on gold by 6%, the imports are not ceasing to reduce.
On the oil front, the situation is very different. India has always been a net importer and unless it works on the underutilized gas reserves present in the country the situation is not going to improve anymore. The prices of oil are primarily ruled by the international policies and any increase on prices has huge effect on our exchequer.
However, very surprisingly, even the services sector that accounts for around 50% of the national GDP declined by 2% and the worst hit were software services exports. Software exports contribute considerably to the GDP and reduction in their contributory quota sends bad signals for the future.
Merchandise exports received no major growth while the last quarter from July- Spetember, 2012 received 7.6% growth.
FII investments increased to $ 8.6 billion from $ 1.8 billion. Though, this may bring smiles to faces but the stay of FII’s invested in our stock markets is very short lived and therefore highly insignificant in guiding the fortunes of the economy.
On the other hand, much needed FDI dwindled to $2.5 billion from $ 5 billion drastically further bringing the moods down. However, government has taken series of steps lately but unless the scenario improves further on the global front, the greatly required foreign investments would be hard to come by. All we can do is to keep our fingers crossed and hope for the best.