Falling gold,oil prices can compress CAD

Japanese brokerage firm Nomura said on Monday the recent fall in gold and oil prices can help compress Indias current account deficit CAD by as much as one percentage point to 4.3 per cent during the current year.

If commodity prices are sustained at todays lower levels,the current account deficit may improve by around 1 per cent of GDP to 4.3 per cent in 2013,down from our base case of 5.3 per cent, it said in a note. It,however,added that the CAD will still be high and financing it will continue to remain a concern.

CAD had hit a historic high of 6.7 per cent in the December quarter of the fiscal 2012-13 and the full fiscal is likely to end with a CAD of over 5 per cent,making it one of the biggest worries for policymakers. Over the last fortnight,though,there has been a major correction in the gold and oil prices,which has renewed optimism on the macroeconomic front for the country.