Millennium Post

India needs USD 70 bln per year for five years to bring down CAD

India needs net capital inflows of up to USD 70 billion annually for the next five years to bring current account deficit  [CAD] down to 2.3 per cent of GDP, prime minister's economic advisor  [PMEAC] C Rangarajan said on Thursday.

To sustain 2.3 per cent CAD over the medium-term, we would need net capital inflows of at least USD 50-70 billion annually over the next five years.

'Given the uncertainty around both the push factors  [rising global risk aversion] as well as pull factors  [slow growth here] that determine capital inflows, attracting such a magnitude of inflows could very well be an uphill task,' said the Rangarajan while delivering a lecture here this evening.

However, the former Reserve Bank governor said there is an expectation of the CAD to be around 3.5 per cent of GDP in the current fiscal.

Blaming the merchandise trade deficit as responsible for the higher CAD of 3.9 per cent in the first quarter of the fiscal, Rangarajan said 'we should also aim at reducing the trade deficit to 6 per cent from the current 10 per cent.'

Current account deficit occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers.
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