- India goes to poll in 9 phases from April 7 to May 12; vote count on May 16
- Sheila Dikshit appointed Kerala Governor; Congress-RJD pact likely today
- You told us go to hell, says Supreme Court, sends Subrata Roy to jail
- For âcheeringâ Pakistan in India match, university in Meerut suspends 67 Kashmiri students
- Attacker, victim: 2 faces of Gujarat riots come together for âHindu-Muslimâ unity
Till there is more coherent policy-making, data will flash red and green at the same time.
Given the remarkably better current account deficit (CAD) — $5.2 billion in Q2FY14 versus $21.8 bn in Q1FY14 and $18 bn, $32.9 bn and $21 bn in the preceding three quarters — it is not surprising the finance minister cited this as yet another sign that the economy was turning around. With the CAD for the first half of the year at $27 bn versus $38 bn in the same period of FY13, the full year's CAD is now on track to be around $50 bn, or 2.7 per cent of the GDP, a remarkable compression compared to last year's 4.8 per cent. The US taper, likely around March or April next year, will once again result in FII money moving out. But, apart from the much lower CAD, the $34 bn the RBI managed to get in so adroitly through its swap window — keeping oil company demand out of the forex market, and then reintroducing it, was another smart move — will ensure India is much better prepared this time.
Though it is true the $16.6 bn reduction in the CAD this quarter largely comprised a sharp $12.7 bn compression in gold imports, there is a slight improvement in non-oil non-gold imports. These are up from $66 bn in Q1FY14 to $69.8 bn in Q2FY14, suggesting a slight pick up in domestic demand, a point reflected in the GDP data as well. The latest Purchasing Managers Index (PMI) data for November reinforces this. For the first time after three straight months of contraction, the PMI was at 51.3 — a number above 50 indicates an expansion. Analysis of sub-indices of the PMI suggests that, since prices of inputs are falling faster than the prices of finished products, margins of manufacturing firms are likely to look better in the months ahead.