New Delhi: India's efforts to curb imports, improve exports and attract greater remittances may help it almost fully fund its Current Account Deficit this fiscal, and also help the Indian rupee recover to 61-level against the U.S. dollar in the next 6-12 months, the report said.

According to the global financial services major, the country's Current Account Deficit (CAD), which is the difference between the outflow and inflow of foreign currency, has the potential to "surprise favourably".

Barclays has cut its FY'13-14 deficit forecast to around $68 billion (from about $80 billion earlier).

"Unless capital flows surprise further to the downside, we think the recent improvements mean India should be able to almost fully fund its current account deficit in FY 2013-14," Barclays said in a research note.

The factors that are narrowing the current account gap include a lower merchandise trade deficit (gold and non-oil, non-gold trade), a steady uptick in services exports and remittance flows, it said.

However, given the present fragile market sentiment, the underlying improvements in India's current account may go unnoticed, it said.

Meanwhile, Finance Minister P. Chidambaram said the government will make all efforts to contain fiscal deficit at 4.8 percent and CAD at 3.7 percent of GDP or $70 billion this financial year.

He further said CAD could be even lower than $70 billion.

In the fourth quarter of last fiscal, CAD was 3.6 percent, while for the whole of FY'13 it stood at 4.8 percent.

Barclays said the currency is likely to be around 61 per U.S. dollar in the next 12 months, largely on the back of an improvement in the CAD.

The rupee fell for the sixth session in a row and breached the 65 mark to an all-time intra-day low of 65.56.

"We expect the INR at 61per dollar in 6-12 months, which partly reflects the current account improvement," it said.

Barclays further said, in the near-term rupee weakness could persist, especially in the absence of policy initiatives to quickly boost capital flows.

"We think recent policy steps have been relatively ineffective at generating near-term flows, and are a drag on the INR," the report added.

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