Finance Minister P. Chidambaram added some extra cheer to the euphoria surrounding stock markets ahead of a festive weekend by presenting a good report card of the Indian economy . He said the current account deficit will come down to $60 billion from $88 billion last year thanks to rising exports and declining gold imports. The earlier estimate pegged the CAD at around $70 billion.
Chidambaram hinted the worst was over for the economy, but cautioned that high inflation and investment remained a concern. He pointed to the impressive performance of the core sector where output rose 8 per cent in September compared with 2.2 per cent in April. Bank credit has risen by 16. 8 per cent year-on-year and also agriculture output is expected to rise, he said.
"Core sector growth ... strong monsoon and healthy exports augur well for economic growth. There are still many challenges, most important being inflation and reviving investment. But I think there will be green shoots even in investment," he told a news conference in Delhi. "We are confident that the measures taken by the RBI and our own measures at maintaining fiscal discipline will eventually bring about a moderation of inflation."
The finance minister urged industry not to "sit on cash" and hold back investments and added that foreign investors consider India as an attractive investment destination. Foreign Direct Investment in India stood at $13 billion until August.
However, one question that Chidamabaram did not elaborate on was how the government planned to meet its fiscal deficit target of 4.8 per cent. "I maintain, we will contain the fiscal deficit target to 4.8 per cent,"' he said, without giving any details.