CAD valuations

There’s yet another angle—a valuation angle—to CAD,measured in proportion to GDP.The latter needs to be converted into dollar terms using the doller-rupee exchange rate.One of the fears expressed about CAD was the sharp rise in the CAD/GDP ratio from 2.6% in FY11 to 4.2% in FY12, 4.6% in April-September FY13, and now projected to be even higher (maybe close to 5%) in FY13.While not in the slightest downplaying the degree of concern, we do need to point out that some of this is due to the weaker rupee.If we convert the H1 FY13 GDP to dollars using the H1 FY12 dollar-rupee (45.3, instead of 54.6 in H1 FY13), the CAD/GDP ratio drops to 3.9%, down from the reported 4.6%. This is not entire notional jugglery.Although it can be argued that the weaker rupee was,in itself,the result of external and internal weaknesses,the recalibration might be the result of lower capital flows (we have seen the CAD had not deteriorated significantly in dollar terms). None of the above is meant to downplay the gravity of India’s high CAD. However,targeted correction measures are urgently needed, which the fuel price rationalisation is beginning to address.High inflation is one of the reasons for the surge in gold demand, which has been the focus of monetary policy. Hopefully, these measures will ameliorate one of India’s key macroeconomic imbalances.
Though previous year on the blog i wrote an article which supports the GDP to debt ratio which still i does and thinks all hype is there about the budget ant the deficit our deficits is not  even close  in alarming zone.
You can go through the previous article.