Touching 54

On the heels of Standard & Poor’s decision to downgrade its India outlook, Morgan Stanley has issued a warning that India is vulnerable to a balance of payments shock. This cannot be a surprise to the Reserve Bank of India, since its governor has described the situation as “disturbing”. An unhealthy combination of a record trade gap and a record current account deficit (CAD) has left the central bank perched on a tightrope. The CAD may hit four per cent of GDP in 2011-12 (it exceeded 4.3 per cent in the third quarter).

Read Full Story>>