Current account deficit will soar sans reforms: Kelkar
01 Oct 2012
The Vijay Kelkar committee has cautioned that India's current account deficit (CAD) might rise to a record 4.3 per cent of gross domestic product (GDP) in 2012-13 if reforms to address this do not take place.
The panel, asked to recommend on consolidation of government finances, also observed that foreign exchange reserves and currency vulnerability resemble those in the infamous 1990-91 balance of payments crisis.
In fact, if no reforms of the type it recommends are undertaken, our economic situation could be worse than in the 1991 crisis, it has warned.
The CAD was 3.9 per cent of GDP in the first quarter ended June, higher than the 3.8 per cent of GDP in the corresponding period last year. In value terms, the CAD was lower at $16.6 billion against $17.5 billion at the same time last year but the CAD-GDP ratio was higher, on account of a lower GDP base in dollar terms.
The rupee was in the 45-48 to the dollar range in the first quarter of 2011-12, whereas it was 55-56 in Q1 of 2012-13.
In case of the ''do-nothing scenario'', the Kelkar report said CAD, 4.2 per cent of GDP in 2011-12, could deteriorate further this year. ''CAD could be possibly at 4.3 per cent of GDP this year, at a time when the world market and capitals flows are exceedingly fragile and where financing of this magnitude is creating huge risks for macroeconomic and external stability,'' it said.
