New Delhi: Capital inflows into India will be enough to cover the current account deficit, C. Rangarajan, chairman of the Prime Minister’s economic advisory council (PMEAC), said on Monday.
“I believe the capital inflows within this year will be adequate to cover the current account deficit,” he told reporters. “There might be some volatility, but I think the rupee will remain in the current range of about 55 even by the end of the year.”
“If India is able to stand up to international financial institutions, it has been because of global capital flows. They have not been even throughout the year, putting pressure on the currency, so we need to watch that, but capital flows have in general done good to emerging market economies, “ Rangarajan said in his address at an event commemorating 30 years of the Exim Bank.
Padma Desai, economist author of Financial Crisis, Contagion and Containment: From Asia to Argentina, said in her address that India would not be affected as much by the so-called fiscal cliff when public expenditure cuts and higher taxes affect the US economy as by the lack of internal political consensus on issues such as allowing foreign direct investment in retail.
Although the government has been unable to make a significant progress in meeting the Rs.70,000 crore revenue target from the spectrum auction and divestment of public enterprises, Rangarajan said the fiscal deficit target of 5.3% for this year to 31 March will remain unchanged.
“There are still about four-five months more and many actions that are possible,” he said, reiterating finance minister P. Chidambaram’s comments made on Friday.
On inflation, Rangarajan said that although “core inflation and food inflation have both gone down, we still need to monitor these further”.
The inflation rate for October measured by the Wholesale Price Index slowed to 7.45% from 7.81% in September. However, the Consumer Price Index accelerated to 9.75% from 9.73% a year ago.