Home / Market / Stock-market-news /  Forex reserves seen adequate to tide over pressure on CAD

New Delhi: India may report a higher current account deficit this year on account of a falling rupee but this is not a cause of worry, said a senior government official who did not want to be identified. The government will also not place a restriction on imports to benefit a few industrialists, the official said.

“There will be short term pressure on the current account deficit but India has adequate foreign exchange reserves to tide over this," the official said, adding that the government is confident of adhering to the fiscal deficit target for 2018-19.

“The current account deficit won’t be as good as last year but with oil prices stabilizing, the situation will not be very bad," he said.

The rupee has been one of the worst performers among Asian currencies, having depreciated by around 9% since the beginning of the year and crossing the psychological level of 70 to a dollar earlier this month. The rupee last saw similar levels in August 2013.

Economists are expecting the current account deficit to be around 2.6-3% of gross domestic product (GDP) in 2018-19. It was 1.9% in 2017-18 as against a peak of 4.7% in 2012-13. The Indian economy is much more stable than in 2013, with all indicators such as the current account deficit, fiscal deficit and inflation indicating macroeconomic stability, said Shubhada Rao, chief economist at Yes Bank. India’s foreign exchange adequacy has significantly improved, Rao said.

“Import cover ratio (the number of months of imports that forex reserves can cover) is at 10 months as opposed to seven months in 2013," she said.

India will meet its fiscal deficit target for the current fiscal, Rao said.

The government is banking on buoyancy in direct tax revenues, especially corporate tax revenues, aided by robust first quarter earnings, stabilising goods and services tax revenues and surpassing the divestment target of 80,000 crore in the current fiscal to meet its fiscal deficit target.

India is aiming at a fiscal deficit of 3.3% of GDP in 2018-19.

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