The Economic Survey 2023, presented in the Parliament on Tuesday, states that the current account deficit may increase further due to an increase in the prices of commodities at the global level. So it needs to be closely monitored.
According to data from the Reserve Bank of India, the country’s current account deficit widened to 4.4 % of gross domestic product (GDP) in the September 2022 quarter. It was 2.2 % of GDP in the April-June quarter.
The Economic Survey for FY 2022-23 said, “Revival has been rapid due to increased domestic demand to a large extent and exports to a lesser extent, raising risks to the current account balance.” In such a circumstance, there is a need to keep a close watch on the current account deficit as the growth momentum of the ongoing financial year may be carried over to the next year.
According to the Economic Survey 2023, the rate of growth in imports so far in the financial year 2022-23 has been much higher than the growth rate of exports. Because of this, the trade deficit has increased.
According to the Economic Survey tabled in Parliament by Finance Minister Nirmala Sitharaman, the challenge of depreciating the Indian currency against the US dollar remains despite the rupee outperforming most of the world’s currencies.
A further hike in policy rates by the US central bank, the Federal Reserve, may put pressure on the rupee. The Survey says, “The current account deficit may widen further as worldwide commodity costs stay high and the Indian economy continues to grow at a strong pace. Further decline in export promotion is possible as global market size may shrink in the second half of the current financial year due to slowing global growth and trade.
On the other hand, the Economic Survey has said that India’s current account deficit will be better than currently projected, with crude oil prices softening due to slowing global growth.
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