India's current account deficit has the potential to surprise favourably, Barclays says. Cuts 2014 financial year deficit forecast to USD 68 billion from USD 80 billion, versus the average of USD 83 billion in the past two fiscal years.

India should be able to almost fully fund its current account deficit in the 2014 financial year unless capital inflows surprise further on downside, the note states.

"The INR weakness and government efforts to curb various imports, on top of sluggish domestic demand reflecting weak economic activity, are also important factors reducing the trade and current account deficits," Barclays says in the note.

Barclays' Rupee forecast is less bearish than many recent forecasts. Deutsche predicted USD/INR to go to 70 in a month or so, while Credit Agricole said it does not see fundamental value below 70.

(Agencies)

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