Twin deficits threaten India’s recovery

New Delhi: Showing signs of strain on the imports side, India’s current account deficit (CAD) widened to 4.9 per cent of GDP on Monday. Moreover, the government’s fiscal deficit in the first five months of the financial year has already touched 74.6 per cent of the full-year target set in budget. The CAD widened to 4.9 per cent of GDP to $ 21.8 billion in the April-June quarter of the current fiscal due to high imports of gold and oil. It had declined to 3.6 per cent in the January-March quarter after touching a record high of 6.5 per cent in the October-December quarter. High CAD is one of the important factors due to which rupee has lost its value against the US dollar. Finance minister P. Chidambaram has set a target to bring down CAD to 3.7 per cent or $70 billion in the 2013-14 fiscal. “Excluding the increase in gold imports of $ 7.3 billion in Q1 of 2013-14 over the corresponding quarter of the preceding year, CAD would work out to $14.5 billion, which translates into 3.2 per cent of GDP,” said the Reserve Bank. Analysts and Indian industry were hopeful that going forward the CAD will ease. However, amidst the economic gloom, the growth of the core infra sectors accelerated to seven month high of 3.7 per cent in August. Eight infrastructure industries posted a seven-month high growth rate of 3.7 per cent in August on the back of good performance by power, cement, steel and fertiliser sectors