CAD gap widens

The country's current account deficit (CAD) -the gap between import payments and export receipts -widened sharply to $10.1 billion, or 2.1% of the GDP , in the second quarter of FY15 due to high gold imports. Economists are forecasting that the lower oil import bill might get partially offset by an increase in gold imports, thanks to Reserve Bank of India's (RBI's) relaxation of gold import norms.
The rising deficit may not have a major impact on the value of the rupee since foreign capital flows have more than made up for the trade deficit. According to a research report by HSBC, the Indian rupee has outperformed the region, supported by strong portfolio inflows and reform optimism, while improving macro data also helped.
The balance of payment (BoP) -the difference between all fund inflows and outflows including overseas capital investments -stood at a surplus of $6.9 billion during July-September. This is the fourth consecutive quarter of surplus. The second quarter last year had seen the BoP position turn negative with a $5-billion deficit as foreign institutional investors sold government bonds in the wake of the volatility triggered by the US Fed tapering off its financial stimulus.
Gold imports during the quarter stood at $7.6 billion, twice the amount of imports in the same quarter last year.The total capital account surplus stood at $18.7 billion during the second quarter, marginally lower than $19.8 billion in the previous quarter

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