Mumbai: India may sustain current account deficit (Paddy) 2.5% to 3% of Gross Domestic Product (GDP) without getting into external trouble, reserve Bank of India Deputy Governor Michael Letter Said on Saturday. He said India would also need to reverse the declining trend of savings rate, which started in 2012-13.
The Deputy Governor was speaking at an event organized by RBI to celebrate 75 years of Independence (Azadi Ka Amrit Mahotsav) in Bhubaneswar. Patra’s statement comes at a time when some forecasters are warning that the CAD could exceed 3% of GDP this year due to the widening gap between exports and imports. The trade deficit hit a monthly high of $30 billion in July.
In his speech, Patra highlighted the inherent strength of the Indian currency, using purchasing power big Mac index. “A frequently used example is the McDonald’s burger, which is believed to have the same wheat, potato, and other ingredients in every outlet in every country. To show you that with money paid for in the US it’s how does it work a big macAny 2.5. can buy Macs in India,” Patra said.
“In the context of purchasing power parity, the exchange rate increases with the prosperity of a nation and its increase in productivity. Indonesian Rupiah With the Indian Rupee emerging as the second strongest currency, it is set to become the strongest currency in the world,” he said. Speaking on domestic savings, he said that an important feature in India is that our growth is home financed – investment is primarily financed by domestic savings, with foreign savings playing only a complementary role.
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