Expect CAD below $70 bn this year: Samiran Chakrabarty

With the September trade numbers, India recorded third straight month of double digit export growth, says Samiran Chakrabarty, head of research, Standard Chartered Bank. Going forward, global economy, particularly the US, will play vital role in determining whether trade deficit number will continue to recede or not.

Also Read: India's trade deficit dips to $6.76bn in Sept
According to him, there is a possibility of current account deficit falling below the USD 70 billion target. In his recent interview, RBI governor Raghuram Rajan too echoed similar sentiment. Below is the verbatim transcript of Samiran Chakrabarty's interview on CNBC-TV18 Q: September oil imports, USD 13.2 billion down 5.9 percent or near, good, bad, ugly, happy?
A: I think this number was more than USD 15 billion last month itself. So that is showing that a couple of billion reprieve has come from oil imports per se. So out of USD 3 billion decline that you were seeing in imports, USD 2 billion is coming out of oil and gold and has remained more or less where it was so practically another one billion must have come from non-oil, non-gold. So both on oil as well as on non-oil, non-gold and I suspect that it is more on the capital goods side where you were seeing some improvement on import numbers.
But to me what is most important is that this was the third month running we are getting double digit plus export growth. To what extent what is happening in the global economy in US particularly would impact these export numbers going forward will be crucial in determining whether we can expect this kind of very good numbers on the trade deficit or not. Q: What will be your current account deficit (CAD) estimate for the current year?
A: We were anticipating in any case that USD 70 billion target of the finance ministry will be met. Now it looks like it could even be better. I am not hazarding a guess here but my sense is that we will better the USD 70 billion for this year. Let us put it this way that we put extreme focus on the high CAD number looking at just one quarter of CAD data. Now it seems that the focus should be shifted from there.
Yes, it is true that there are some structural issues in CAD as well but the fact that we had slow growth, we had currency depreciation, we had controls over gold imports, all these seem to be working in conjunction now to bring this number within the comfort level. Q: The oil imports has fallen 6 percent on a year-on-year (Y-o-Y) basis for September. Does that give you some discomfort on consumption and what could be the repercussions in terms of what is going on with growth?
A: If you look at the monthly consumption data for most of the fuel items particularly on diesel, we have been seeing if I am not mistaken for more than six months now that diesel consumption on a Y-o-Y basis was recording a negative print. So, growth slowdown is definitely having an impact on fuel consumption. This could have been even further if we had calibrated our retail fuel prices with international fuel prices then I would have anticipated oil imports to come down even more but clearly 4-4.5 percent growth will have a knock-on effect on import demand for all kinds of commodities that goes without saying.