The country’s current account deficit widened to 4.4% of GDP in the quarter ending in September, according to the latest data from the Reserve Bank. Image for reference only | Photo credit: PTI
Tuesday’s 2022-23 economic survey highlighted the need for close monitoring of the current account deficit (CAD) which could continue to widen due to high global commodity prices.
The country’s current account deficit widened to 4.4% of GDP in the quarter ending in September, from 2.2% of GDP in the April-June period due to a higher trade deficit. high, according to the latest data from the Reserve Bank.
“… downside risk to the current account balance stems from a rapid recovery driven primarily by domestic demand and, to a lesser extent, by exports,” the study said, adding that “the CAD needs to be watched closely because the growth momentum of the current year spills over into the next”.
The growth rate of imports has been faster than that of exports in 2022-23 so far, leading to a widening trade deficit.
In a cautious move, the key government document, which was tabled in parliament by Finance Minister Nirmala Sitharaman, said the challenge of the depreciation of the rupee, although performing better than most other currencies, persists with the likelihood of further interest rate increases by the US Federal Reserve.
“CAD widening may also continue as global commodity prices remain elevated and growth momentum in the Indian economy remains strong. Loss of export stimulus is further possible as slowing growth world and trade shrinks the size of the world market to the second in the current year,” says the Survey.
On the other hand, the survey indicated that subdued global growth presents “two silver linings” – crude oil prices will remain low and India’s CAD will be better than currently presented.