Montek: current growth rate can finance 3pc CAD

Mumbai: Planning Commission deputy chairman Montek Singh Ahluwalia today expressed confidence that the country can finance a current account deficit (CAD) of 3 percent, which had reached 4.3 percent last fiscal.

"We are seen as a fast growing economy and it has that potential. As long as that message is conveyed and people recognise that we welcome foreign investment and portfolio investment, I don`t think it would be difficult to finance it (a 3 percent CAD)," Ahluwalia said.

A CAD of 3 percent is sustainable and can be financed by a steady inflow of FDI and institutional investment through portfolio flows, he said while addressing students of the Tata Institute of Social Sciences on their convocation day here.

The CAD represents the difference between exports and imports after considering cash remittances and payments.

On the back of record rise in imports, the country was left with a trade deficit of USD 185 billion last fiscal, despite exports also overshooting its target by a few billion dollars at USD 303 billion. This had a debilitating impact on the CAD position which nearly doubled to 4.3 percent of GDP in Q4 of the last fiscal against 2.3 percent for the fully FY11.