IBEF: July 05, 2019
The Government of India is expected to further ease the foreign direct investment (FDI) norms with an objective to bridge the widening current account deficit (CAD), according to the Economic Survey 2018-19.
Restriction on the government policies related to FDI are expected to lift in order to maintain the stability of funding CAD. Increase in investment and exports act as drivers of Indian economy along with slow in consumption leading to deterioration of CAD.
The deficit rose to US$ 57.2 billion or 2.1 per cent of gross domestic product (GDP) in 2018-19 as against 1.8 per cent in the former year.
The CAD, which is the net of foreign exchange inflows and outflows, had risen at US$ 48.7 billion in 2017-18.
The widening of CAD has been driven by a deterioration of trade deficit from 6 per cent of GDP to 6.7 per cent across the two years.
The survey detailed that amongst the major economies running current account deficit, India is the largest foreign exchange reserve holder and eighth largest among all countries of the world.
FDI inflows into India have dropped slightly by one per cent to US$ 44.37 billion in 2018-19.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.