The Finance Ministry is in talks with commerce, petroleum, fertiliser and pharma ministries on steps to cut CAD, the sources added.
Official data released in December showed India’s current account deficit widened to $36.4 billion or 4.4 of GDP in the third quarter of 2022, from $18.2 billion or 2.2 percent of GDP in the second quarter.
However, it may narrow down a bit in 2023 as commodity prices ease and domestic demand comes off the boil, according to Capital Economics.
The country’s CAD has ballooned over the last year amid the surge in commodity prices following the outbreak of the Russia-Ukraine war. There are concerns that the gap may remain wide given that exports are slowing amid recession in the West.
Finance Minister Nirmala Sitharaman tabled the Economic Survey 2023-2024 on Monday, just before the highly anticipated Union Budget 2024-25 is unveiled the following day. The Union Budget for the fiscal year 2024-25 will be presented in Parliament this Tuesday by Sitharaman, marking the first budget of Prime Minister Narendra Modi’s third term.
Monsoon session begins today and will have 19 sittings till August 12 when the government is expected to present six bills, including the one to replace the 90-year-old Aircraft Act, and also get Parliament’s nod for the budget of Jammu and Kashmir, which is under central rule.
Meanwhile, Chief Economic Advisor V. Anantha Nageswaran expressed the government’s confidence in meeting the 7 percent growth target outlined in the Economic Survey 2023-24, which was presented on July 22. Speaking on Monday, Nageswaran acknowledged that while achieving this target is feasible, there are several potential risk factors to consider.
“While 7 per cent is eminently doable, there are some risk factors given the way the monsoon has shaped up and financial markets risks are rising in the developed world with spillover effects on India and the geopolitical environment,” Nageswaran said.
The government remains optimistic about reaching the growth target but is aware of these challenges, including variable weather patterns, increasing financial market uncertainties in developed economies, and geopolitical complexities.
FAQs
What is the Monetary Policy Report (MPR)
he Monetary Policy Report (MPR) is an official document issued by the Reserve Bank of India (RBI) that provides an assessment of the macroeconomic situation in the country. It outlines the RBI’s views on inflation, growth, and other economic factors and the monetary policy measures it plans to implement to achieve its objectives.
What does the MPR say about the Current Account Deficit (CAD)?
The MPR provides an analysis of the country’s current account balance, including details on the Current Account Deficit (CAD). It discusses the reasons for any changes in CAD, such as trade deficits, import growth, or changes in capital inflows. The RBI may also suggest measures to mitigate the CAD or improve the trade balance.