See FY14 CAD at $60bn; rupee may trade at 61/$: Barclays

Siddhartha Sanyal, Chief India Economist, Barclays Capital sees positive developments on the current account deficit (CAD) front and expects FY14 CAD to be significantly less than FY13 at around USD 60 billion.

In an interview to CNBC-TV18, he said that Indian rupee is likely to trade at 61/USD in the next three-six months. Also read: Q1 CAD better-than-expected; see more Q2 trouble, say experts Q: What is your sense of how the current account deficit (CAD) is going to pan out? The markets are just ignoring the CAD problem, what is your sense? A: I think there is a clear positive story out there. If you see the current account number in this particular print it was something around USD 22 billion. But the improvement actually has started after that. So, the next print can very well be sub USD 10 billion which could be a very significant improvement. For the year as a whole it can very well be within USD 60 billion. Last year we were around USD 88 billion. Therefore, we are talking around USD 30 billion improvement in one single year and in one particular area which was bothering us for the last two-three years very significantly. It is a very positive development, possibly the biggest tailwind. Q: So where does the rupee trend from here? A: We have a stable to positive bias in case of INR so we do see it more in the range of around 61/USD in the next three-six months. We see a little bit of improvement in the next few months. Q: You must have analysed this shutdown and the coming debt ceiling to the hilt, how do you expect flows to behave towards emerging markets, what is the in-house view? A: We are somewhat cautious on that particular front because any uncertainty is not very good for overall risky segments of the market. Now, given that in India the domestic factors are improving at the margin not growth though, so one needs to stay cautious Going back to the earlier point, the CAD story is a significantly positive story. However it may not be a situation where we will see a huge amount of accretion to our reserves just because the current account is somewhat better and therefore we need to stay somewhat cautious on that particular front. Q: The core sector numbers which were a big positive this time around, how hopeful would you be about that? A: There are two stories out there; the significant negative or somewhat flat numbers which we had been seeing till last quarter, we may not that going ahead. However, the growth numbers could be stuck in the low single digit zone. So, won’t be too hopeful in terms of a growth recovery because this is a quarter where you are seeing some kind of uptick in industrial segment but at the same time the government spending part will possibly see some kind of softening in this particular segment. Therefore, as a whole, it is some kind of a balancing act – mid 4 percent growth overall in case of GDP is more likely in this quarter as well.