As external environment becomes challenging, RBI moves to boost inflows, anticipating pressures ahead | The Indian Express

Clipped from: https://indianexpress.com/article/opinion/editorials/rbi-moves-to-boost-inflows-anticipating-pressures-ahead-8015851/

For the entire first quarter, the deficit was more than double the level observed last year, and many analysts are now expecting the current account deficit to widen beyond 3 per cent of GDP this year.

The structural constraints that lie at the heart of the current account deficit — a heavy dependence on imports of crude, coal and gold — are yet to be tackled.

Data from the Union ministry of commerce and industry on Monday showed that the merchandise trade deficit had surged to a record high of $25.6 billion in June. For the entire first quarter, the deficit was more than double the level observed last year, and many analysts are now expecting the current account deficit to widen beyond 3 per cent of GDP this year. This comes at a time when capital outflows have gathered pace as central banks across the world, especially the US Federal Reserve, have begun to sharply raise rates. Since September last year, the country’s foreign exchange reserves have fallen quite sharply. Alongside, the DXY or the dollar index, which measures the strength of the greenback against six major currencies, has strengthened as other currencies have weakened. The Indian currency has also fallen, and on Thursday, ended the day at 79.16 against the dollar. With this backdrop, the Reserve Bank of India unveiled a slew of measures designed to attract capital flows on Wednesday.

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