India is expected to achieve current account surplus due to lower crude oil prices this fiscal, despite the Covid-19 pandemic, a report said on Monday.
According to a SBI Ecowrap report, with capital flows turning positive as the economy slowly re-starts, it can mitigate some of the losses that we have seen. “Analysis of past crises shows currencies can swing wildly. However, they stabilise if the right measures are taken,” it said.
The current account shows the net difference between inflows and outflows of foreign currencies.
“What’s important is that we focus on improving macro-economic fundamentals and monitoring how the composition of our capital flows is changing, so that we are prepared when the investor sentiment turns negative.
“The RBI has stated that a diversified capital account, with a hierarchical preference for FDI over debt flows, and for long-term flows over short-term flows, should be the focus of external sector policy,” it said.
The report also said India had to “a great extent succeeded in that and this has provided a cushion from volatilities inherent in various FPI components.”
Besides, the country’s external debt position was also sustainable with the external debt to GDP ratio at 19.8 per cent at end-June 2019, it said.
“If the government takes the right steps and brings back growth, investors won’t shy away from investing in India,” the SBI Ecowrap report said.
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