India's current account gap narrowed sharply to $5.2 billion, or 1.2 per cent of GDP, in the July-September quarter of 2013-14 on the back of turnaround in exports and decline in gold imports.
The current account deficit, the difference between outflow and inflow of foreign exchange, was $21 billion, or 5 per cent of the GDP, in the second quarter of last fiscal.
"Contraction in the trade deficit coupled with a rise in net invisibles receipts resulted in a reduction of the CAD to $26.9 billion (3.1 per cent of GDP) in H1 of 2013-14 from $37.9 billion (4.5 per cent of GDP) in H1 of 2012-13," Reserve Bank of India said in a statement.
Notwithstanding a lower CAD during April-September of 2013-14, there was a drawdown of foreign exchange reserve to the tune of $10.7 billion as against an accretion of $400 million in same period last fiscal mainly due to a decline in net capital inflows under the financial account, it added.
Both the government and RBI are expecting the CAD to be below $56 billion in the current fiscal compared to the record high of $88.2 billion, or 4.8 per cent of the GDP last fiscal.
Besides, pick up in exports, the steps taken by the Reserve Bank and the government have resulted in a sharp decline in gold imports, which was one of the main contributors to high CAD last year.
The government has taken several steps, including hike in gold import duty to 10 per cent and restrictions on import of gold bars and medallions, to restrict CAD.
It has also taken measures to boost exports, taking advantage of depreciating rupee.