The government has chosen the wrong way to control the current account deficit.
Large trade deficit and rupee decline against the US dollar are putting pressure on the CAD, and these steps are likely to have a positive impact on the external sector.
FMCG majors ITC and HUL along with RIL and ONGC weigh on the indices.
The trade gap was $11.66 billion in December 2015 while in September 2015 it stood at $10.16 billion
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Continuing their massive selling spree for the ninth consecutive month, foreign investors dumped Indian shares worth Rs 50,203 crore in June -- the highest net outflow in over two years -- amid aggressive rate hike by the US Federal Reserve, elevated inflation and relatively higher valuation of domestic equities. Foreign portfolio investors (FPIs) have now pulled out around Rs 2.2 lakh crore from domestic equities in the first six months of 2022 -- the highest-ever net withdrawal by them. Before that, FPIs withdrew Rs 52,987 crore in the entire 2008, data with depositories showed.
Balance of payment stood at a surplus of $30.1 billion during January-March
High current account deficit is leading to the rupee weakening.
RBI had reduced the key policy rate, the repo, in consecutive policy meets, in January and in March, by 25 basis points each.
The country's current account deficit is likely to hit a three-year high of 1.8 per cent or $43.81 billion in FY22, as against a surplus of 0.9 per cent or $23.91 billion in FY21, a report said on Thursday. According to an assessment by India Ratings, the Current Account Deficit (CAD) has moderated to $17.3 billion or 1.96 per cent of GDP in the fourth quarter of FY22 as against $8.2 billion or 1.03 per cent in the year-ago period, and massively down from $23.02 billion or 2.74 per cent in Q3, which was a 13-quarter high. The improvement in the key numbers are due to the remarkable improvement in merchandise exports in FY22, when it grew 42.4 per cent as against a negative 7.5 per cent in the pandemic-hit FY121.
The primary and immediate impact of a depreciating rupee is on the importers who will have to shell out more for the same quantity and price. However, it is a boon for the exporters as they receive more rupees in exchange for dollars. The rupee depreciation has wiped away some of the gains that would have accrued to India from international oil and fuel prices dropping to pre-Ukraine war levels.
The rupee appreciated 7 paise to 79.74 against the US dollar in early trade on Thursday as a positive trend in domestic equities supported the local unit. However, a strong American currency overseas and forex outflows restricted the rupee's gain, dealers said. At the interbank foreign exchange, the rupee opened at 79.72 against the American dollar, then went lower to trade at 79.74 against the greenback in early deals, registering a gain of 7 paise over the last close.
Gold imports, which have a bearing on the current account deficit (CAD), plunged 57 per cent to USD 6.8 billion (around Rs 50,658 crore) during the first half of this fiscal amid a slump in demand due to the Covid-19 pandemic, showed data by the commerce ministry.
India needs to sustain a GDP growth rate of 8 per cent to become a five trillion dollar economy by 2025, the Economic Survey has stated.
The CAD occurs when a country's total imports of goods, services and transfers are more than total exports of goods, services and transfers.
The government hiked import duty on gold to 10 per cent and the RBI also imposed curbs on its imports by linking it with exports.
Credit rating agencies have been raising red flag over high debt to GDP ratio of India.
Despite a high current account deficit (CAD) and lower interest rates abroad, the Union government will not go for a sovereign bond issue to get more dollars.
The CAD was brought under control in 2013-14 after government imposed restrictions on import of gold. Following, this in 2014, certain restrictions were withdrawn.
On the rupee, it expects some appreciation pressure on in the near term from greater portfolio flows.
Shamsheer Ustaad refused to become collateral damage when his industry modernised, discovers Geetanjali Krishna.
The lower CAD was primarily on account of a decline in the trade deficit.
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India's current account deficit narrowed down to 3.6 per cent of GDP in the January-March quarter but totalled a record 4.8 per cent for the full 2012-13 fiscal.
In a major move in 2016, the US had designated India a "Major Defence Partner" intending to elevate defence trade and technology sharing to a level commensurate with that of its closest allies and partners.
'Mere fundamentals will not do the trick,' cautions former commerce secretary Rahul Khullar.
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Chidambaram also said the government will take steps to curb imports of gold, silver, oil and luxury goods.
He exuded confidence that the Indian economy will grow at 5.3 per cent in 2013-14.
The Reserve Bank of India had taken steps to tighten liquidity in a bid to curb volatility in the forex market after the rupee fell to a record low of 61.21 to the dollar on July 8.
Both the government as well as the RBI took a series of steps to curb imports of gold and other non-essential items in addition to increase foreign exchange inflows.
The recent fall in commodity prices might not be sufficient to bring down the country's widening current account deficit
India's trade deficit has fallen to 10-month low of $14.9 billion in February on improving exports and a sharp drop in imports.
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The Indian currency had hit record low of 57.32 against a dollar in June last year.
It rose to 5.3 per cent of GDP in the second quarter.
Higher imports and moderating exports growth has lead to the widening of the CAD.
Lower gold imports and higher overall exports to help narrow the gap.
In order to check rising current account deficit, the government had raised import duties on the yellow metal to 10 per cent while Reserve Bank of India imposed curbs on import of gold and also laid down various pre-conditions for inward shipments of the precious metal.
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According to the global financial services major, the country's Current Account Deficit, which is the difference between the outflow and inflow of foreign currency, has the potential to 'surprise favourably'.
The Finance Ministry on Wednesday described the sharp fall in the value of the rupee as a reflection of "irrational sentiment" and said there is no need for panic.
Both the government and RBI are expecting the CAD to be below $56 billion in the current fiscal compared to the record high of $88.2 billion, or 4.8 per cent of the GDP last fiscal.
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