Current Account Deficit reaches record highs

Discussion in 'Economy & Infrastructure' started by sob, Mar 30, 2013.

  1. sob

    sob Moderator Moderator

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    Rupee may face pressure as current account deficit rises to a record - Print View - Livemint

    CAD or Current Account Deficit is the sum of the balance of trade (i.e., net revenue on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.

    In simplistic terms it means it is the sum total of Exports-Imports-Loan Repayments or FII outflows+remittances from NRIs.

    A couple of years ago a CAD at 3% of GDP was considered high but now it is at 6.7%in the 3rd Quarter. It is expected to improve marginally in the 4th quarter due to better export figures but the problem is that as a percentage of the GDP with the denominator sinking the CAD percentage may not go down.
     
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  3. sob

    sob Moderator Moderator

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    shom likes this.
  4. Daredevil

    Daredevil On Vacation! Administrator

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    Some people are saying that Rupee is over valued and therefore it should be allowed to depreciate to reach its right value. This will increase exports and discourage imports leading to some balancing of CAD. Rs. 60 seems to be right value for $1
     
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  5. Neil

    Neil Senior Member Senior Member

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    doesnt that increase inflation...?? and considering our industrial output at lowest levels kind of bad move right...??
     
  6. Daredevil

    Daredevil On Vacation! Administrator

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    Actually the depreciation of rupee happens due to inflation and not the other way round. By making our imports expensive, there will be some cool down in spending our foreign exchange.
     
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  7. badguy2000

    badguy2000 Respected Member Senior Member

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    of course, it is called Imported inflation.... it is imported by rising oil cost.
     
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  8. Neil

    Neil Senior Member Senior Member

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    sorry DD sir eating your brain here...

    sir but whatever we import will be costly like say oil and stuffs and u cant stop essentials from importing isnt it...??
     
  9. badguy2000

    badguy2000 Respected Member Senior Member

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    the worse trade balance just show how hard the industrialziation and upgrade of industry go on in India.....
     
  10. Daredevil

    Daredevil On Vacation! Administrator

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    Of course it will. But there are just so many businesses which are dependent on imports and they will be subdued. And the savings from the decrease in import will be far greater than the increase in the cost of imports. This will also give fillip to our local industries to supply to our domestic consumption.
     
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  11. trackwhack

    trackwhack Tihar Jail Banned

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    Congress knows they will lose 2014. Might as well handover a broke country to nda and blame them for the mess.
     
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  12. shom

    shom Regular Member

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    Machines are made to be oiled by its owner and nobody else,,, so plzz mate maintain that ,,,,,,
    See I found many of your machines really dosen't work properly mate,,,,
    http://www.marketoracle.co.uk/Article38147.html
    Small-business suicides expose China’s hidden economic crisis | Seattle Globalist
    China Economic Crisis: Why 44 Percent of Wealthy Chinese Want to Leave the Country
    China’s Looming Economic Crisis. Poverty and Rising Social Inequalities | Global Research
    Stop thinking about fire in other houses when your own house is facing Lava streams,,,,,,, hahahahahaaa
     
  13. shom

    shom Regular Member

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    Machines are made to be oiled by its owner and nobody else,,, so plzz mate maintain that ,,,,,,
    See I found many of your machines really dosen't work properly mate,,,,
    http://www.marketoracle.co.uk/Article38147.html
    Small-business suicides expose China’s hidden economic crisis | Seattle Globalist
    China Economic Crisis: Why 44 Percent of Wealthy Chinese Want to Leave the Country
    China’s Looming Economic Crisis. Poverty and Rising Social Inequalities | Global Research
    Stop thinking about fire in other houses when your own house is facing Lava streams,,,,,,, hahahahahaaa
     
  14. hello_10

    hello_10 Tihar Jail Banned

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    this news doesn't surprise me. India has to keep Indian Rupees value at somewhere close 1.0 INR = 1.5 Pakistan Rupees, and 1 Yuan = 10.0 INR, somewhere close to, of these currencies of its neighbors. and until India makes it import expansive enough to be less imported this way, we will have bigger CAD in future. and yes it will then need to bring the 1$ = INR 65 this way, which will then make the import of oil expansive too but we do know that India can't import more than what it already does. and until the imported products are made expansive enough to be less imported, the growing CAD will not be controlled :nono:

    the exchange rate value by end 2002/early 2003 was standing at around 1.0 US$ = Rs 50, while its hardly around 1.0 USD = 54.5 rupees right now, while India suffered around 7% annual inflation on average since 2002, which has increased manufacturing cost by around twice since then this way, while China on comparison had only around 3% annual inflation on average since then. China, with which India has highest trade deficit for those manufactured products which may be produced in India itself.... similarly India suffer very high trade deficit with EU as below for those luxury products which has to be made expansive enough to be less imported this way...... :thumb:

     
    Last edited: Mar 30, 2013
  15. hello_10

    hello_10 Tihar Jail Banned

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    and at the same time we have a news as below too :ranger:

     
  16. Snuggy321

    Snuggy321 Regular Member

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    Mhhhh this is the data of the 3rd quarter right? So it is not from this FY.
     
  17. sob

    sob Moderator Moderator

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    It is from the FY 12-13 which is getting over today. Generally there is a time lag of a couple of months for the data to be collated and then released, in this case I think the FM did not want it to be released clos to the Budget.
     
  18. mylegend

    mylegend Regular Member

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    India should eliminate its subsidy on gasoline and diesel to reduce oil import. India should also invest in critical infrastructure to encourage FDI investment. The very minimum Indian government can do is ensure steady electricity supply and built reliable logistical system around coastal area.

    India should have put nationalism aside for the very least at their electricity equipment industry. They impose hefty tariff on Chinese equipment while provide no alternative plan to boost domestic one. For the very least Indian government could have done is to divert all the tariff income from import of Chinese equipment to subsidized its own. However, due to its political motivated natural of the tariff, Indian government failed to adjusted economic side of the problem. The tariff will make the public and domestic equipment company happy but sacrificing broader economy.

    To further expand my argument why the electrical equipment tariff is purely political motivated, one must see that the bill offer no solution on fighting capacity shortage, It offer no plan on enhancing domestic manufacturer capability and on how to make up for the lose of Utility firm.

    Government policy should be more comprehensive, like the last time when US government raise minimum hourly wage, the bill include tax refund for industry that rely heavily on low cost labor.

    After all, you have to improve profitability of power plant to encourage investment.
     

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