India's current account deficit (CAD), a source of much concern lately, seems to have come under control, according to the latest Reserve Bank of India data. India's CAD fell to $5.2billion (1.2% of GDP) in the second quarter of fiscal year 2013/2014 from $21bn (five per cent of GDP) in the second quarter of last year (2012-2013).
The lower current account deficit was driven by a narrowing trade deficit as gold imports came down sharply and exports picked up on the back of a weakening rupee. Gold imports saw a sharp decline to $3.9 billion from 16.4 billion in the first quarter of fiscal year 2013/14 and $11.1bn in the second quarter of last fiscal year.
India attracted $6.9 billion of foreign direct investment and there was a drawdown of foreign exchange reserves of $10.4 billion in the second quarter of the year as compared to the second quarter of last fiscal.
India's Current Account Deficit, which hovered at about 5% of GDP last fiscal was termed unsustainable, a concerted effort, has been made by P Chidambaram to bring it under control as India's economy came under intense scrutiny for its twin deficits-fiscal and current account. The Reserve Bank Governor, Raghuram Rajan recently reiterated that the Current Account Deficit for the current fiscal would be below 3% of the GDP and $32 billion less than last year.