Concerns over high inflation and current account deficit (CAD) have abated, a top government official said on Thursday, while also ruling out a rethink on GST compensation payout to States.

The analysis was shared at a time when retail inflation based on Consumer Price Index (CPI) has hovered around 7 per cent till June. The number for July will be made public on Friday. Though it is expected to come in below 7, it is still likely to be over 6.5 per cent — the upper band of targeted inflation range of 4 per cent with a swing of 2 per cent in each direction. Meanwhile, trade deficit for June revised upwards, which is why the presumption is that the CAD will be in the range of 3-3.7 per cent of GDP.

“Prices of crude and fertilisers are coming down in the international market,” the official said. Some moderation is simultaneously being seen in the prices of gold and coal, two other items for heavy dollar outgo. “Considering all these, concerns about CAD have abated,” the official said, while adding that India is better placed in terms of inflation management. Steps such as cutting levies on fuel are beginning to show results.

The official also mentioned that the Finance Ministry and the RBI have kept a close watch over the global situation. Accordingly, RBI is making intervention in the forex market. “There has been much volatility in INR-USD market but not in relation with other currencies. Also, keeping in mind the Federal Reserve action, the Finance Ministry and RBI have responded in a way that does not hurt growth. At the same time, RBI has gently raised the rates,” the official said.

GST compensation

On resumption of GST compensation, the official said: “Compensation was being paid out from cess collected on some goods in the 28 per cent category and the law prescribes payout for five years. Now the cess has been extended till March 2026 solely for repayment of back-to-back loan. So, where will the money come for compensation?” the officials asked, while expressing hope that States will get good money with the pick-up seen in overall GST collection.

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