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LATEST NEWS UPDATES | Why India’s Balance of Payments is Headed for Hard Times -Prabhat Patnaik

Why India’s Balance of Payments is Headed for Hard Times -Prabhat Patnaik

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published Published on Jan 7, 2023   modified Modified on Jan 8, 2023

-Newsclick.in

The yawning merchandise trade deficit is occurring not because of any economic boom but in the midst of creeping industrial stagnation.

India’s current account deficit for the second quarter (July-September) of 2022-23 has reached a massive $36.4 billion, which is 4.4% of the gross domestic product, higher than at any time in the last nine years. It is only in October-December 2012 that the absolute level of the current account deficit had been $32.6 billion which was 6.7% of the GDP (gross domestic product).

By contrast the current account deficit had been $18.2 billion in the first quarter of 2022-23 or 2.2% of GDP, and $9.7 billion or 1.3% of GDP in the second quarter of 2021-22, i.e., exactly a year ago.

In other words, compared with the first quarter itself, there has been a doubling of the current account deficit as a percentage of GDP which is a whopping increase; compared with the second quarter a year ago, the increase in GDP percentage is more than three times.

Quite apart from the sheer size of the current account deficit, there are at least three reasons why the balance of payments is a cause for serious concern. First, the reason for the increase in the current account deficit, by as much as $18. 2 billion compared with the previous quarter, is an increase in merchandise trade deficit, that is, in the excess of imports over exports of goods.

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Newsclick.in, 7 January, 2023, https://www.newsclick.in/India-Balance-Payments-Headed-Hard-Times


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