India may dip into forex reserves to finance CAD: World Bank

India may have to dip into its foreign exchange reserves to finance the current account deficit (CAD) in 2013-14, the World Bank said.

“International reserves could decline somewhat in 2013-14 but would still amount to a comfortable import cover of approximately five months,” the World Bank said in its latest India Development Update.

The CAD for the first quarter of the current financial year was $21.8 billion, or 4.9 per cent of gross domestic product, driven by sluggish exports and high gold imports in April and May.

The government plans to narrow the CAD to $70 billion, or 3.7 per cent of GDP, in 2013-14 from $88.2 billion, or 4.8 per cent, in 2012-13.

The World Bank estimates that the country’s CAD will narrow to 4.1 per cent of GDP this year and to 3.7 per cent in FY15.