RBI sees India’s current-account deficit staying within 3% of GDP
India’s central bank expects the country’s current account deficit to stay within a limit it considers sustainable amid softening global fuel, food and fertilizer prices while portfolio flows and exports pick up.
“Overall, the current account deficit is expected to be within 3% of gross domestic product,” the Reserve Bank of India said in its September Bulletin. “With portfolio flows returning and foreign direct investment remaining strong, this order of deficit is eminently financeable.”
RBI Governor Shaktikanta Das has assured the markets several times that the current account gap will be sustainable and the central bank can finance it comfortably. Deputy Governor Michael Patra in an August speech pegged a range of 2.5%-3% of CAD as sustainable.
RBI’s take on the CAD — the widest measure of external finances — assumes importance as economists from Citigroup Inc. and Standard Chartered Plc. peg the deficit at near 4%, terming the record trade deficit in the last two months as ‘unsustainable’.
