Fixing India’s current account

The country is in the midst of twin deficits of gross fiscal deficit (GFD) and current account deficit (CAD). The GFD, though high, has been on a declining trend, while the CAD continues its uptrend and is expected to record a new high in the current year after 4.2% of GDP in 2011-12. According to the latest data released by RBI on March 28, the CAD for April-December 2012 was 5.4% of GDP (and 6.7% in Q3). Earlier, the highest recorded CAD of 3% in 1990-91 was followed by a major BoP crisis soon after.

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