According to projections by the International Monetary Fund (IMF), India’s current account deficit this year is going to be worse than that of Indonesia, as well as Brazil. In June, this column wrote about the increasing risks to financing India’s current account deficit. In 2017-18, much of the current account deficit was financed by external short-term credit and foreign portfolio inflows into the debt markets. The problem is that the current account deficit is already wide, even though investment demand in the country is tepid. Simply put, if we have higher growth, we will have a higher current account deficit, which will weaken the currency further, stoke inflation and lead to higher bond yields.

Source: Mint September 05, 2018 03:22 UTC