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Last updated: 02 Oct, 2023  

Rupee.9.Thmb.jpg CAD concerns

Staff Reporter | 02 Oct, 2023
Current account deficit jumped 7-fold in the April-June quarter. It stands at $9.2 billion against $1.3 billion in the preceding quarter, according to RBI data released last week. The central bank points out three factors - higher trade deficit, lower surplus in net services and decline in private transfer receipts. Experts caution that the situation may worsen further with rising crude oil prices in the international market.

Detailed data shows that merchandise trade deficit – which although decreased from $63.1 billion a year-ago -- increased to $56.6 billion in the first quarter from $52.6 billion in the preceding quarter. On net services, the central bank points out decline in exports of computer, travel and business services while private transfer receipts moderated to $27.1 billion from $28.6 billion.

The April-June quarter CAD amounts to 1.1 per cent of GDP and it may reach over 2 per cent in the July-September quarter on account of increase in oil prices in global markets combined with India’s higher core imports and further slowing of services exports. Russian crude accounts for a third of India's fuel imports and according to an estimate, rise in average price of oil to $100 per barrel may push the second half CAD to 2.1% of GDP.

Meanwhile, decline in foreign exchange reserves has added to the economy's woes. RBI data shows that forex reserve fell for a third consecutive week to a four-month low of $590.7 billion as of September 22. Previously, the forex kitty decreased by $867 million to $593.04 billion for the week ended on September 15 and by $4.992 billion to $ 593.904 billion for the week ending September 8. This, along with the rupee ending at 83.04 on Friday, is not good news for the economy.

I invite your opinions.

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