Government To Closely Monitor Current Account Deficit Amid Declining Export Growth

The government on Monday said it is aware of the downside risks to the Indian economy and will closely monitor the current account deficit in view of the decline in export growth.

Minister of State for Finance Pankaj Chaudhary said the government has implemented several measures to limit the impact of external factors on India’s inflation and growth.

The price situation of major essential commodities is monitored by the central government on a regular basis and corrective action is taken from time to time. Several supply-side measures have been taken by the government to address inflation, like cut in excise duty on petrol and diesel, prohibition of export of wheat products, imposition of export duty on rice, reduction in import duties and cess on pulses, maintenance of buffer stock for onion and pulses.

"In the second half of 2022-23, retail inflation has fallen below the tolerance ceiling, portfolio investments have started to return, the rupee has stabilized against the U.S. dollar, but export growth has declined with the slowing of global growth. The current account deficit thus needs to be closely monitored," Chaudhary said in a written reply in the Lok Sabha.

The country's current account deficit, which is the difference between the inflow and outflow of foreign exchange, widened to 4.4% of the GDP in the quarter ending September, from 2.2% of the GDP during the April-June period due to a higher trade gap.

India's exports contracted by 12.2% to $34.48 billion in December 2022 due to the global demand slowdown, and the trade deficit widened to $23.76 billion during the same period, according to government data.

The Economic Survey 2022-23, tabled in Parliament last week, too had stated that India's export growth is likely to be flat in the next fiscal if the global economy does not pick up.

Following the war in Europe, global supply chains were disrupted resulting in the increase of global commodity prices. To restrain the consequent inflation, major central banks around the world undertook monetary tightening.

"High global inflation and monetary tightening have together slowed global growth. The government recognises the impact of slowing global growth on the Indian economy," he said.

Chaudhary said the government has taken note of the January 2023 update of the World Economic Outlook, which has projected global growth to decline from an estimated 3.4% in 2022 to 2.9% in 2023.

"The government is further aware of the downside risks to these projections from uncertain outcomes associated with the reopening of the Chinese economy and persisting war in Europe," Chaudhary said.

The Minister said the government is of the view that countries around the world will continue to face policy challenges to navigate their respective economies.

He said to boost growth, a series of measures have been announced in the 2023-24 Budget, including an increase in capital investment outlay for the third year in a row by 33% to Rs 10 lakh crore, which is 3.3% of GDP.