Mint Quick Edit | External front stability: Good news, but not entirely
With the global economy experiencing an upheaval, external balances have been under watch around the world. In India’s case, data released by the Reserve Bank of India on Friday presents an optimistic picture.
Also Read: Manufacturing versus services: Why privilege one over the other?
Our current account balance recorded a surplus of 1.3% of gross domestic product (GDP) in the January-March quarter, despite the goods trade deficit widening to $59.5 billion from $52 billion a year earlier. What helped outweigh the merchandise gap were net receipts from services, which rose to $53.3 billion from $42.7 billion.
Also Read: America’s remittance tax will empower shady cash-transfer cartels
Also, personal transfer receipts (think remittances) climbed to $33.9 billion from $31.3 billion. For the full year, though India still ran a current account deficit, the strong last quarter shrank it to 0.6% of GDP from 0.7% in 2023-24. This too is well within safety limits.
Also Read: Post-ceasefire hangover: The world is awash in crude oil right now
Overall, favourable external balances could lend the rupee support and reduce inflation risks from a weakening currency. If oil prices stay cool, pressure on our goods balance may ease too.
That said, foreign investments have been weak, both direct as well as portfolio. As an emerging economy, we need robust capital inflows. And we have space to let our current account deficit widen a bit.
Post Comment