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Exports slowdown is spelling serious problems for country finances

Updated: Mar 28, 2013 06:13:33pm
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Mumbai, Mar 28, (KNN) Decline in merchandise exports mainly observed in items like engineering , petroleum products, textiles and iron ore have led to a situation where India is facing a major problem in financing its current account deficit (CAD) which touched a record high 6.7 per cent of the the country’s GDP in the third quarter of the financial year 2012-13.

The problem with  serious implications on the movement of rupee in the foreign exchange market and is expected to bring further anxiety in the stock market, has mainly arisen from almost no growth in merchandise exports but 9.4 per cent expansion in imports, driven mainly by oil and gold imports  according to the latest data released by the Reserve Bank of India today.

 The CAD rose by 61 per cent to USD 32.6 billion in the third quarter (October-December) as compared to USD 20.2 billion in the same period of the previous financial year of 2011-12.     For the cumulative April-December ,2012-13 the CAD works out to USD  71.7 billion amounting 5.4 per cent of the country’s gross domestic product as against USD 56.5 billion (4.1 per cent of GDP) in the corresponding period of the financial year 2011-12.
   
 The current account is one of the two primary components of the balance of payments, the other being capital account.  CAD is the sum of the balance of trade ( difference between imports and exports) and earnings on foreign investments minus payments made to foreign investors.
  
The development has an implications for the real economy – small and medium enterprises, as it would affect the rupee rate and the overall markets. Besides, the government’s finances also are in a weak state and it might force it to raise fresh resources by way of levies and taxes. (KNN)

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