No need for exaggerated concern about external account: CEA

Merchandise trade deficit has been shrinking steadily relieving pressure on the external account, says Chief Economic Advisor Nageswaran

February 28, 2023 09:10 pm | Updated 09:10 pm IST - NEW DELHI 

There is no need for “exaggerated concern” about India’s external account situation, Chief Economic Advisor V. Anantha Nageswaran asserted on Tuesday, while stressing that the Economic Survey’s forecast of 6.5% growth for 2023-24 was well within the range of those estimated by other agencies although downside risks dominated the upside potential. 

“India’s merchandise trade deficit, which was running at $30 billion around the third calendar quarter of 2022 has been steadily shrinking, which obviously relieves the pressure on the external account,” the CEA said adding that services exports were doing well too. 

“Overall FDI flows in the current financial year until about the third quarter, based on the RBI monthly bulletin, we do see it is just a tad lower than what it was on a net basis compared to the previous financial year. But overall, we might end up with a number that is closer to somewhere between $40 and $45 billion of net FDI flows,” he pointed out.   

“Forex reserves after having dipped all the way through October, picked up again and because of the slight withdrawal of portfolio flows in January and February, have shown a slight decline in the last few weeks. Nonetheless, whatever concerns people have with respect to India’s external situation at the moment seems somewhat unnecessary. It is something that we need to keep a lookout for, but there is no need for exaggerated concern given the number of months of import cover we have..” Mr. Nageswaran concluded. 

Allaying concerns about the dip in imports in recent months as a sign of possible cooling of domestic demand, Mr. Nageswaran said the import bill had been declining because of the fact that crude oil prices had moderated quite a bit.

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