FY14 CAD may be lower than estimated $70bn: Rangarajan

India’s trade deficit for the month of September fell to USD 6.76 billion from USD 17.15 billion a year ago. With this improvement, PMEAC chairman Dr C Rangarajan sees FY14 current account deficit (CAD) even lower than projected USD 70 billion.

While exports are up 11.15 percent to USD 27.68 billion in September, imports have dipped 18.1 percent to USD 34.44 billion. Gold and silver imports slid to USD 0.8 billion for the period in focus from USD 4.6 billion in September 2012. Gold is the biggest non-essential item in India's import bill. In an interview to CNBC-TV18 Rangarajan said that several factors have contributed to decline in gold imports. However, he also warned that pick-up in gold imports is likely during the upcoming festive season. With a view to curb dollar outflows, last month, the finance ministry had pushed up import duty on gold jewellery from 10 to 15 percent. Also Read: PMEAC lowers growth projection for 2013-14 to 5.3% Below is the edited transcript of Rangarajan’s interview with CNBC-TV18 Q: USD 6.7 billion trade deficit for September for the quarter July, August, September it works out to USD 30 billion trade deficit, any guesses whether the overall current account deficit (CAD) could be lower than the USD 70 billion that finance ministry is talking about? A: Our own estimate was that the CAD will be about USD 70 billion but we had indicated in the report that the April CAD maybe even lower than that. It appears that the trade deficit is much lower and therefore we can see the further moderation in the CAD beyond what we are indicated. Q: Would you think that with numbers coming in so strong, we would be in place to allow the oil marketing companies (OMCs) to come back to the market? A: The decision will have to be taken very soon because once moderation happens and the rupee remains more or less stable, we should let OMCs come back and buy dollars from the market. That is the natural process and we may have to do it even earlier than what we had expected before. Q: Do you think that we could better that USD 70 billion that was estimated for the entire fiscal? A: I think so. The indications are that it will be better than that and it could be significantly lower than USD 70 billion. The interesting thing is pick up in exports. The growth rate has remained at double digit level for more than two months in a row. Some part of imports is definitely coming down – the likes of gold import, even though it may pick up because of the coming festival season. On the whole for the year, gold import will be lower. Therefore, if it all factors are in the account, I certainly expect the CAD to be much lower than what we have estimated.