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Resource centre on India's rural distress
 
 

Patra: India can sustain CAD of 2.5-3% without an external sector crisis

-The Telegraph

Overall current account deficit in July rises to $21.04 billion (merchandise and services), commerce ministry reports on Friday

Mumbai: Reserve Bank of India deputy governor Michael Patra has tried to soothe concerns about the anticipated surge in India’s current account deficit, suggesting that the country will not be roiled by a crisis if the CAD climbed to anywhere between 2.5 and 3 per cent of GDP.

“Our experience has been that India can sustain a current account deficit of 2.5-3 per cent without getting into an external sector crisis. In fact, in a telling reminder of this fact, a record increase in oil prices and high gold imports took the current account deficit above this Plimsoll line and to historically high levels during 2011-13,’’ Patra said while delivering a speech to celebrate ‘Azadi Ka Amrit Mohotsav’ organised by the RBI office in Bhubaneswar.

India’s CAD rose to its highest level of 5 per cent of GDP in 2012 when the UPA was in power — and the Modi government has often pounced on this fact to muzzle criticism about the growing trade deficit.

The overall current account deficit in July rose to $21.04 billion (merchandise and services), the commerce ministry reported on Friday.

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