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India’s Rajan Says Current-Account Deficit Narrowed Last Quarter

Raghuram Rajan, chief economic adviser to the government of India, addressed the nation’s latest data, speaking on the sidelines of IIMPact 2013 in Singapore today.

India’s current-account deficit widened to a record $32.6 billion, equivalent to 6.7 percent of gross domestic product, in the three months ended Dec. 31 as oil and gold imports surged. The $1.8 trillion economy will probably expand 5 percent, the slowest pace in a decade, in the financial year ending March 31, the government estimates.

On the current-account deficit:

“My sense is that the fourth quarter current-account will be significantly narrower than third quarter, because our exports have done better. Unless there is some significant dips the most recent March numbers, we should be on track for a significant narrowing of current account deficit.

“The quarterly deficit will come down from 6.7 percent. The year-on-year deficit will be around 5 percent. Those are the estimates out there and I don’t dispute those estimates. Even 5 percent is much too large.”

India’s fiscal year ends March 13.

On inflation:

“Core inflation has been contained at very subdued levels. The number for the year is 3.8 percent. That has been brought under control. The big issue now is to bring food prices under control. We have to wait and see what happens with the harvest. The indicator for the harvest is that it’s stronger than earlier estimates. So I’m hopeful that we’ll get some breathing space from food inflation.”

On India’s growth forecast:

“The next fiscal year we’ve made a projection of 6.1 to 6.7 percent. We still hold to that. There is no reason to revise that.”

On foreign investment caps:

“We are looking at every element. The commerce minister the other day in a speech talked about defense. What that suggests is that all areas are being looked at, even the former holy cows.”

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