CAD as percentage of GDP: Nowhere near 2012-13 level, yet worrisome

If up to $50 billion is withdrawn from forex reserves to finance CAD, the country would still be able to meet nine month's imports. Any withdrawal beyond this could pose a problem

Much has been said and written about the twin deficit problem the economy is facing in the current financial year. There is a third aspect that makes this problem more worrisome. And that is the capital account. Generally, capital inflows help India finance its current account deficit (CAD), obviating the need to dip into foreign exchange reserves.

Economists believe the CAD could touch three per cent of GDP this fiscal, compared with 1.2 per cent in the previous year. This would be the highest that the CAD would have reached after it had touched 4.8 per cent of GDP