Current account report

The current account continues its slippery path; some grace is saved upon receiving CSF money in the last week of February; the deficit stands at $744 million in February, while it was $1.2 billion in January. The Jul-Feb toll stood at $5.4 billion (2.0% of GDP) which is more than double of same period last year.

Barring the $350 million CSF flows; the deficit is over a billion dollar a month. Around $200 million of CSF flew in the first week of March and finance ministry is betting another $400 million in the last quarter of the fiscal, but the toll will remain short of $600-700 million from the target; and current account for full year might slip proportionately.

Exports fell further to $1.7 billion in February; to have declined by 2 percent year-on-year to $14 billion in eight months. The export cash package is yet to translate into numbers in the last quarter to bring some semblance to full year exports. It ought to increase by $500 million each month to reach $23 billion in FY17. It's a tough task, but exporters with government's help have to push it hard.

Textile and other manufacturing exports compromise three fourth of the total and they have cash incentives in offing on incremental exports. In Jul-Feb, they fell by 4 percent 7 percent respectively; the package started in January would probably be visible in numbers from March onwards.

Imports in February fell by $261 million to $3.9 billion; still the Jul-Feb growth is in double digits with imports approaching $30 billion. How much the full cash margins on numbers of imports can curtail the rising trend is yet to be seen. Transportation group imports grew by two fifth in the eight months or by $447 million and now with hundred percent cash margin requirement on both CBU and CKD units, it can be curbed.

But that is peanuts as the group only constitutes only 5 percent of total imports; while main drivers of imports are petroleum and machinery groups which grew by 15 percent and 12 percent respectively and combined they are two fifth of imports. They are likely to continue on high momentum as rapid infrastructure expansion warrants that.

The trade deficit soared by 27 percent to $15.4 billion. In the last few years, remittances were covering the trade deficit fully; and that has changed adversely now - remittances fell by 2 percent in Jul-Feb and its covering mere 80 percent of trade deficit. This simply explains $3 billion difference of CAD between Jul-Feb17 and Jul-Feb16.