Expert Zone
Straight from the Specialists
India’s current account deficit: solution lies in exports
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The U.S. dollar is the major currency for international trade. Most countries use it to pay for their imports and also peg the dollar for exporting products and services.
The balance of trade (net import or export) would determine if a country is a net payer or a receiver of dollars. Trade, along with other dollar inflows (portfolio/FII, FDI, inward remittances), determines the overall availability of the international currency for a country to engage itself in the global economy. This also has a bearing on determining the exchange rate of a country’s own currency with that of the dollar.
An account that keeps a tab on the dollar expenses and dollar inflows for a period (normally an accounting year) is commonly known as the ‘current account’. A negative balance amounts to current account deficit (CAD), indicating broadly that the country’s imports exceed exports.
India has been persistently running a CAD. The deficit has widened in recent years as a percentage of GDP and has become a concern for policymakers, economists and global investors.
Consequences of an export squeeze
(The views expressed in this column are the author’s own and do not represent those of Reuters)
In June, exports shrank more than five percent to $25 billion largely due to recessionary conditions in major importing countries such as the U.S. and the EU. Although exports are not as critical to us as they are to Singapore or China, they do count for a lot.
Exports on the bounce
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Exports are performing exceedingly well. This does not look like a spark in the pan because the commendable performance has lasted more than 10 months in spite of repeated warnings by the Secretary, Ministry of Commerce, that the escalating trend line will bend down because of the slowing of the U.S. and EU economies.
