Higher rates, weaker rupee can restore India’s trade balance4 min read 25 Oct 2022, 10:09 PM IST
The country’s widening current account deficit reflects a fall in savings but higher policy rates and a weaker rupee can help
Tricky times. On the one hand, India’s foreign exchange reserves remain elevated at $533 billion—a respectable 8.6 months of goods import cover—even after a fall of about $100 billion since the start of the year. On the other hand, both the trade and current account deficits have widened sharply, pointing towards a balance-of- payments deficit which could linger for the foreseeable future. After remaining relatively stable for a couple of months, the rupee has weakened 4.5% against the US dollar since early September. What explains the growing imbalances? And is the economy taking the right remedial steps?
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