Higher exports, stable rupee are key to curbing current account deficit

Our Bureau New Delhi | Updated on April 17, 2014 Published on April 17, 2014

Rajeev Kher, Commerce Secretary

Fluctuating rupee hits export prospects

India needs to keep its current account deficit in check by promoting exports and stabilising exchange rate to realise the good economic prospects being projected by agencies such as the World Bank, said Commerce Secretary Rajeev Kher.

“In spite of good economic prospects, Indian economy faces some challenges. The country has had high current account deficit for the past few years, which has been contained by export growth and restrictions on gold imports,” Kher said at the annual convocation of the Indian Institute of Foreign Trade on Thursday. Current Account Deficit (CAD) is the difference between the foreign currency inflow and outgo of a country.

Trade deficit, which is the difference between the imports and exports of a country, is an important component of the CAD.

Managing a sustainable current account deficit necessitates a conducive exchange rate regime and appropriate savings and investment policies, the Commerce Secretary said. “At the same time, it is important to manage large bilateral deficits through export promotion and policy dialogue,” he added.

Exporters say that a fluctuating rupee is a big handicap in taking pricing decisions, as they do not know what price to quote to their buyers.

Since there is a time lag between placement of orders and receipt of payment, a highly fluctuating rupee would keep exporters guessing on what value they would ultimately realise.

Rising exports and moderation in gold imports pulled down India’s current account deficit to $4.2 billion, or 0.9 per cent of GDP, in the December quarter of 2013-14. CAD narrowed to $31.1 billion (2.3 per cent of GDP) in April-December 2013.

Published on April 17, 2014
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