The central government is confident that the current account deficit (CAD) for this financial year can be contained at about 2 percent of gross domestic product (GDP), reported Business Standard, citing senior government officials.
According to the report, the confidence comes on the back of the fall in global crude oil prices, which is currently below $50 a barrel, just months after crossing $86 mark. The estimate, the report said, is also significantly lower than the earlier calculations of the government that had estimated the CAD to be 2.8 percent of the GDP.
“When the oil prices were at their peak, it appeared that the CAD for FY19 was heading for somewhere around 2.8 per cent of GDP. Now, since the decline, the current trajectory appears to be around 2-2.2 percent of GDP. If the oil prices keep slipping, it could even be below 2 percent,” a senior government official was quoted as saying in the report.
“There was a time when oil prices had gone up sharply. There were also other headwinds, such as the pace at which the Fed (United States Federal Reserve) was tightening rates. We also had problems with our credit markets. The good news is that on all three fronts, the pressure has eased significantly,” the official added.
However, even with recent changes, the CAD is still expected to be higher for the financial year when compared to last fiscal’s 1.9 percent.