Imports of capital and consumption goods would pick-up with economic recovery
India's current account deficit (CAD) narrowed sharply to $32.4 billion (1.7% of GDP) in fiscal 2014 from $87.8 billion (4.7% of GDP) in fiscal 2013. The correction in CAD was primarily due to a contraction in merchandise imports coupled with a rise in service exports.Capital inflows at $48.8 billion - buffered by a surge in inflows under foreign currency non-resident (FCNR) deposits - were more than sufficient to finance the CAD, resulting in a $15.5 billion accretion to India's foreign exchange reserves.
In fiscal 2015 however, CRISIL expects CAD to widen to $47 billion (2.2% of GDP) as restrictions on gold imports are gradually withdrawn and imports of capital and consumption goods pick-up with economic recovery.
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