Key Points
Indias current-account deficit shrunk to 0.2% of GDP in the fourth quarter of the previous financial year (January-March 2023) owing to a sharp reduction in the trade deficit..
Robust export earnings from services (essentially computer services) and from the remittances of Indian workers abroad, representing one form of services exports, almost compensated for the trade deficit of $52.6 billion to make the current account deficit a trifling $1.3 billion...
Reports on the development have tended to describe the shrinking of the current account deficit as a welcome development..
In other words, when we have a current-account deficit, domestic investment is larger than domestic savings. Which is better for a developing economy: to limit investment to domestic savings or to augment domestic savings with savings from abroad, made available by countries that run a current-account surplus?.
We should thus look for moderate current-account deficits rather than surpluses, invest more than we save to accelerate growth beyond what is achievable solely by domestic savings, without giving reasons for external investors to worry about our ability to service our liabilities. ..
