The government has chosen the wrong way to control the current account deficit.
After trading hours, the government said the June-quarter current account deficit widened to $21.8 billion from $18.1 billion in the previous quarter.
Whether nominal or real, India's investment rate needs to increase by 3 to 4 percentage points of GDP to support 8 per cent real growth, recommends Nikhil Gupta.
'We need to be very vigilant as we are passing through some fraught times.'
'India has the potential to grow at more than 7%, with the monetary policy providing a supportive hand.'
Indian and US officials will begin deliberations on the proposed bilateral trade agreement in Washington from Wednesday with an aim to iron out issues and give an impetus to the negotiations.
Current account deficit occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers.
'If you align your ambition with India's rise, the peak of your careers will unfold alongside the peak of India's power.'
India's widening current account deficit (CAD), driven by the massive spike in commodity prices led by crude oil, is set to put pressure on the fragile recovery, warns a brokerage report that has revised upwards its CAD forecast to $45 billion or 1.4 per cent of GDP by March. According to a report by British brokerage Barclays, the worries arise from the fact that the trade deficit has been jumping continuously since July. From an average monthly trade deficit of $12 billion till June, it has jumped to $16.8 billion in July-October, with September showing the highest-ever trade deficit on record at $22.6 billion, the report said.
Global private equity major KKR has ranked India second among the emerging markets on external risks, citing the high fiscal and current account deficits.
The World Bank on Tuesday raised the growth forecast for the Indian economy to 7 per cent for the current fiscal year on the back of recovery in agri sector and rural demand. World Bank had in June projected India to grow at 6.6 per cent for FY24. According to the World Bank Report released on Tuesday, India's growth continues to be strong despite a challenging global environment.
'If it doesn't, it will continue with measures to infuse liquidity, signalling a new cycle,' predicts Tamal Bandyopadhyay.
The sharp rally in the markets thus far in fiscal 2023-24 (FY24) has left analysts struggling to find investment-worthy themes. The S&P BSE Sensex has surged nearly 7 per cent thus far in FY24 and hit a fresh 52-week high of 63,601.71 levels on June 22, mostly led by foreign institutional (FII) flows. "The Indian market has seen a broad rally in the past few months but headline indices have seen more modest performance. "We are not very clear about the reasons for the rally and the divergent performance and struggle to find ideas in the consumption, investment and outsourcing sectors after the sharp run-up in several of our favored sectors and stocks in the past two months," wrote Sanjeev Prasad, co-head, Kotak Institutional Equities, in a recent co-authored note with Anindya Bhowmik and Sunita Baldawa.
'Investors' decisions should reflect their financial goals, risk tolerance, and the amount of gold already present in their portfolio.'
The fiscal deficit, as per the survey, deteriorated to 5.8 per cent of the GDP as compared to 3.4 per cent for 2018-19 estimated in the interim Budget.
The current account deficit, the difference between outflow and inflow of foreign exchange, would be about 2.3 per cent of gross domestic product because of the fall in gold and non-essential imports, the financial services major said in a report.
The US retaliatory tariffs are a major setback for the Indian gems and jewellery exports, apex industry body GJEPC said on Thursday as it urged the government to take steps to secure the long-term interest of the sector. The US has announced 27 per cent reciprocal tariffs on India saying New Delhi imposes high import duties on American goods, as the Donald Trump administration aims to reduce US' trade deficit and boost manufacturing.
Indian growth in the rest of this fiscal year and next will be propelled by robust domestic consumption as consumer confidence improves, and by investment, including large increases in government capital expenditure, according to the Asian Development Outlook September 2023. "As slowing exports could foment headwinds for the economy, and erratic rainfall patterns are likely to undermine agricultural output, the growth forecast for FY2023 is revised down marginally to 6.3 per cent," ADB said.
.jpg)
Analysts see FY16 CAD at 0.5-0.6% of GDP.
The GDP growth is expected to be about 6.3 per cent in the current fiscal year, a tad lower than the government's estimate of 6.4 per cent, owing to several factors such as weak demand, SBI research report said on Wednesday. According to the first advance estimates (FAE) of National Income for 2024-25 released by the National Statistics Office (NSO), released on Tuesday, India's economic growth rate is estimated to slip to a four-year low of 6.4 per cent in 2024-25, because of poor showing by the manufacturing and subdued investments.
The feud reached its peak when Musk made explosive allegations about Trump's connection to disgraced financier Jeffrey Epstein, marking a dramatic escalation in their increasingly personal conflict.
A depreciating rupee, which briefly hit 80 to the dollar on Tuesday, may boost India's exports but price-inelastic imports of crude oil and gold would mean limited relief on the trade deficit, which clocked a record $26.2 billion in June. Due to global risk aversion on the back of geo-political tensions and aggressive policy tightening by the Fed, the dollar has appreciated against most currencies, including the rupee. And, with other currencies depreciating, India's comparative advantage in this respect may be limited.
If there was one event that made the month of August stand out, it was a strengthening of the dollar index to levels last seen only 20 years ago, as the Federal Reserve dispelled all doubts about its intention to continue raising interest rates. Predictably, most currencies suffered against the US unit, with the bulk of the losers belonging to the emerging markets pack. Amid the volatility, the rupee, however, has displayed significant resilience and fared much better than most of its peer currencies.
While SGBs are a sound investment, they aren't worth buying at any price. The interest income you earn from them will not justify paying a high premium.
Amid the ongoing global tariff war, Reserve Bank Governor Sanjay Malhotra on Wednesday said he is more worried about its impact on growth than inflation. Speaking to the media after presentation of the first bi-monthly monetary policy for the current financial year, Malhotra said, RBI has reduced the growth forecast for 2025-26 by 20 basis points to 6.5 per cent.
The CAD has been narrowing since 2012 to an estimated 1.6% of GDP in 2014
The CAD occurs when a country's total imports of goods, services and transfers are more than total exports of goods, services and transfers.
India's current account deficit (CAD) may dip further in the March quarter of FY24 as pressure from the negative net exports during the January-March period eased to an 11-quarter high. A part of the gross domestic product (GDP) data, net export- which is usually negative for India - captures the difference between exports and imports of both goods and services, while the CAD data, released by the Reserve Bank of India (RBI), also factors in private transfer receipts.
Increase in gold imports pushed the country's trade deficit to a five-month high of $ 15.33 billion in April.
Only 21 tonnes of gold have been mobilised in the last eight years under the gold monetisation scheme (GMS) which was announced by the Government of India in November 2015. This could be considered as a failure as the scheme has undergone several changes with a revamped GMS announced in April 2021 to improve collections. This figure was released by the World Gold Council (WGC) on Wednesday in its report titled 'Gold Investment Market and Financialisation, in India gold market series'.
BSE Oil & Gas, Healthcare and IT indices have surged by 3% each followed by counters like TECk, Banks, Realty, PSU, Power and Metal, all gaining between 1-2%.
'... as has been happening in the last three weeks, then the foreign exchange reserves will not be comfortable to ensure that the rupee does not fall drastically.'
The government may save over Rs 70,000 crore (Rs 700 billion) on capital and revenue expenditure allocated towards new schemes in the FY25 Budget that are yet to be implemented.
.jpg)
The trade deficit stood at $6.54 billion in February this year.
The Barclays' report also said that the effort to reduce fiscal deficit through austerity measures is weighing on growth.
Finance Minister Arun Jaitley presented the Budget in Parliament on Saturday.
Prices may go up because of higher energy costs, caused by the rise in shipping charges, with commercial vessels taking a longer route to avoid the troubled Red Sea region, the finance ministry said on Monday. Iran-backed Houthi rebels of Yemen are repeatedly attacking ships in the Red Sea. While the global economy is grappling with challenges such as sticky inflation, sluggish growth, and mounting fiscal pressure, India's external sector could face "potential risks" due to the ongoing geopolitical tensions, according to the finance ministry's report on the review of the Indian economy.
India's passion for gold has led to a rise in its current account deficit, which reached an all-time high of 5.4 percent of gross domestic product in the July-September quarter.
Sustained dollar demand from importers and banks amid weakness in the equity market and the firming dollar overseas mainly affected the rupee value against the dollar, a forex dealer said.
India's purchase of US crude oil has picked up in 2025 and could easily double their previous levels, government officials said on Wednesday. The surge comes in the wake of the then-incoming Donald Trump administration's announcement that it would consider hiking tariffs on a reciprocal basis, and pushed some countries, especially those with large trade surpluses with the US, to buy more of its energy.
© 2026 Rediff.com - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances