Current Account Deficit

Finance minister Nirmala Sitharaman recently spoke of three ‘Fs’ that we must conserve amid the West Asia crisis. On all three fronts, let’s aim to replicate the revolution that spelt security for India on the fourth F we were once so short of—food.

India needs foreign capital but China’s global investment patterns merit some caution. Funding can bring knowledge and skill transfers but could also mean spillbacks into China of ideas picked up here. We need favourable flows.

Foreign investor dollar returns from Nifty 50 plunged on the back of a steep 10% fall in the rupee, earnings growth decline over the past one year. Ample domestic liquidity gives cohorts an easy exit.

Indians buy gold both as a fallback and a way to multiply wealth. The recent surge in demand for gold, however, can be tempered more easily if investment is the goal—as data suggests it increasingly is. Non-physical options can click.

As Indians are urged to spend less and save more, is the economy at risk of a problem identified by Keynes almost a century ago? That depends on whether austerity behaves like inflation sometimes does.

As the West Asia war strains India’s economy, rising deficits and a record-low rupee are forcing a delayed, but much-needed, shift from fiscal defence to demand curtailment.