Fiscal Deficit: India's current account deficit; a major concern: Mecklai

India’s Current Account Deficit (CAD) has been a growing concern for the policy makers. The measures taken to combat inflation and put the economy on the path of growth have been offset by high current account deficit along with fiscal deficit. Prime Minister’s economic think tank, C Rangarajan, who heads the Prime Ministers Economic Advisory Council (PMEAC), has pegged the CAD for next fiscal year at 3.6%, worse than 3% at the time of 1991 Balance of Payment Crisis.

PMEAC has asked Government to narrow down the CAD between the range of 2-2.5 %. Adding to the woes of Government, fiscal deficit is also expected to cross the budgeted level for current fiscal year of 4.6%. The impact of high CAD has been clearly visible on the falling Forex Reserves, which have shrunk to $ 293 billion from as high as $ 320 billion.

As per the recommendation of the PMEAC, we can expect some bold measures that would be taken to control the high CAD, fiscal deficit and the overall Balance of Payment situation of the country.

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