Q2FY14 CAD Dips To 1.2% Of GDP

There is considerable positiveness in domestic market after removal of sanctions on Iran by five developed countries including USA. Again the GDP numbers in last week also helped to maintain positiveness over domestic market. Today, the Reserve Bank of India (RBI) reported lower current account deficit (CAD) numbers for second quarter for this financial year.

The CAD for the said quarter dipped to USD 5.2 billion against USD 21 billion during same quarter last year. the CAD as a percentage of GDP came at 1.2 per cent this quarter against 5 per cent on yearly basis. The turnaround in the exports and decline in gold imports helped to lower CAD this quarter. Further, the trade deficit for reported quarter reported at USD 33.3 billion against USD 47.8 billion on yearly basis.  There has been improvement of exports of textiles, leather products, and chemicals, according to RBI.

Interestingly, the foreign direct investment was net inflows of USD 6.9 billion for said quarter, while net portfolio investment experienced an outflow of USD 6.6 billion. Further, FIIs' investment in equities during the quarter was marginal net outflow of USD 0.8 billion, while in debt instruments  was  higher ourtflow of USD 5.7 billion. This is outflow from indian market by foreign investors are on the wake of possibilities and indications given by US Fed tapering of its quantitative easing programme.