Even as analysts and economists predict India’s current account deficit (CAD) to be over 3%, the Reserve Bank of India (RBI) is expecting the CAD to be within 3% of GDP.
This confidence of the country’s Central Bank stems from India’s export performance. In its State of the Economy report, the Central Bank says that the export target of $750 billion for goods and services for 2022-23 is appearing within reach. In addition, it says that India is cementing its position as the top remittances receiver in the world, with inflows touching US$ 90 billion last year and set to create a new record (this year).
A country has a current account deficit when its imports of goods, services and net income from overseas investments exceed its exports.
The RBI also appeared confident of financing this deficit. “With portfolio flows returning and foreign direct investment remaining strong, this order of deficit is eminently financeable,” it said in its State of the Economy report.
And even as the RBI is optimistic about lower than 3% CAD, analysts have a different view. Recently, rating agency ICRA projected CAD at 3.5% of GDP in FY23.
India Ratings in a report on Friday said that as GDP forecasts of some of India’s key exporting destinations such as the US, Eurozone and China have been revised downwards, this may put India’s exports targets of $750 billion (goods and services) for FY23 in jeopardy.