Aug trade deficit to be lower than July: Saumitra Chaudhuri

Saumitra Chaudhuri of Planning Commission expects August trade deficit to be lower than July's. In an interview to CNBC-TV18, he says: "The trade deficit is coming off not only because of the currency effect, but also on fall in gold imports. In June and July, the trade deficit has been on an average USD 12.3 billion. For August, the final numbers will not be substantially larger; it maybe even lower."

He further added that moderation of trade deficit is good news for the economy. "Even if we take modest estimate, at least on a 12 month basis, the CAD maybe moderating to a point where it will be eminently financeable. So, to a great extent, it will calm fears regarding where the external balance may be leading us to," he explains. Meanwhile, he sees FY14 GDP growth at 5.5 percent. Also Read: Why Indian exports need more than a cheap rupee Below is the edited transcript of Saumitra Chaudhuri’s interview with CNBC-TV18 Q: The trade deficit numbers today, the rupee year-on-year has depreciated 15 percent, what is your estimate of today’s number, the August trade deficit number? A: The trade deficit is probably coming off for a variety of reasons. It is not just the currency effect. There is also an effect that gold imports have come off. We have had two months in June and July where trade deficit has been on an average USD 12.3 billion. For August, the final numbers will be out in a day or two, but it will not be substantially larger, maybe even lower. We are looking at moderation of trade deficit, which is very good news for the economy as a whole. This is because part of the troubles that we had this summer was because of large CAD last year and an enormous expansion in the trade deficit in April and May. People felt that it was indication of things getting out of control. With the trade deficit now coming in at moderate levels, suggests that even if we take modest estimate, at least on a 12 month basis, the CAD maybe moderating to a point where it will be eminently financeable. So, to a great extent, it will calm fears regarding where the external balance may be leading us to. Q: What is your estimate of the CAD for the full year? A: For the year, it is different because there are two months which are very badly skewed i.e. May and June. From a 12 month perspective starting from June onwards, one is looking at USD 12-12.5 billion right now and that adds around USD 150 billion in a year and that is not going to be the trade deficit for the year. Because trade deficit for the year is going to be skewed by May and June which had USD 17-20 billion trade deficit. That will lead us to higher number. But market participants are going to say okay those two were bad months, it is behind us now. Going forward what are we going to get. What are the risks to that? And that will be basically USD 12.5 billion plus risk from oil prices going up. There might be risks with the growth revised the demand for non-oil non-gold items may also rise. Export growth may be sustainable. We had a double digit positive number for dollar exports in July, we may get a repetition in August but would that survive. These are the kind of questions people are going to ask. People are not going to be excessively bothered about what has happened in the past. What is happening today and what is happening prospectively is what will concern most people. Q: Over the weekend, one was also expecting a diesel price hike announcement. Would you say that one big diesel price hike is needed and would you also be expecting it shortly? A: I think this matter is being discussed in the government at the highest levels. Petroleum minister has said a few things on this. I don’t wish to add to this. Q: What is your gross domestic product (GDP) estimate for the current year? A: My estimate is between 5 percent and 5.5 percent, probably closer to 5.5 percent than 5 percent. It will be in that range. First quarter was pretty bad, it was an awful quarter. But I suspect that second quarter was better than first quarter marginally and the second half will be better than the first half.