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Capital inflows enought to meet CAD target: PC

Exuding confidence that current account deficit (CAD) will come down to 3.7 per cent of GDP in 2012-13, finance minister P Chidambaram on Monday said overseas capital flows would be sufficient to bridge the gap in inflow and outflow of foreign funds.

‘If you want to finance CAD, we must attract FDI, FII and to extent necessary and desirable ECB. We think that, after looking at the factors, $70.3 billion (3.7 per cent of GDP) will be fully financed by capital flows and substantial part will come from FDI, FII and ECB,’ Chidambaram told reporters .

In 2011-12, CAD touched a 30-year high of 4.2 per cent of the GDP or $78 billion. CAD occurs when country’s total imports and transfers are higher than its total exports and transfers.

‘Policy decisions can influence three main heads – FDI, FII and ECB – which is why we lay emphasis on attracting more FDI, FII and ECB,’ he said.

Chidambaram said that remittances and short-term borrowings could also help finance the CAD. ‘Fortunately remittances are good at this point. But there can be no policy decision that can influence remittances. It is the growth of economies in countries where India work that will decide how much they will save,’ he said.

Foreign Institutional Investors (FIIs) have been bullish on India and have invested Rs 94,337 crore ($18.1 billion) in equities so far this year.

During April-July 2012, the Foreign Direct Investment (FDI) inflows dipped to $6.18 billion from $14.6 billion in the same period last year.

Indian companies raised over $2.36 billion from overseas markets in September by way of External Commercial Borrowings (ECBs) and Foreign Currency Convertible Bonds (FCCBs).
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