Need to closely monitor CAD: Economic Survey

Economic Survey 2022-23 on Tuesday emphasized the need for close monitoring of the current account deficit, which could continue to widen due to rising global commodity prices.

The country’s current account deficit widened sequentially to 4.4 percent of GDP in the September quarter, from 2.2 percent of GDP in the April-June period due to a widening trade gap, according to the latest Reserve bank data.

Also read: President Mormo lays down a vision of ‘Amrit Kal’ to build a developed India in 25 years

“Downside risks to the current account balance stem from a rapid recovery mainly driven by domestic demand and, to a lesser extent, exports,” the study said, adding that “the Canadian dollar needs to be watched closely as growth momentum in the current year extends into the next.”

The growth rate of imports has been faster compared to that of exports in 2022-23 so far, leading to a widening trade deficit.

The depreciation of the rupee

In a sign of caution, the key government document, which has been tabled in Parliament by Finance Minister Nirmala Sitharaman, said the challenge of depreciation of the rupee, although it has performed better than most other currencies, remains with the possibility of further increases in the value of the rupee. Policy rates by the government. US Federal Reserve.

“The Canadian dollar may also continue to expand as global commodity prices continue to rise and growth momentum in the Indian economy remains strong. It could also lose stimulus for exports given slowing global growth and trade shrinking the global market size in the second half of this year.”

On the other hand, the survey said weak global growth presents two “silver lines” – crude oil prices will remain low, and the Canadian dollar in India will be better than currently supplied.

Also read: ECLGS Support MSMEs in the face of the Covid shock; It led to remarkable credit growth