Current account woes

 

 

Current account woes

 

Proper structural reforms are needed to boost exports, reduce dependence on imported oil
The latest trade(व्यापार ) figures(आंकड़े) published by the Reserve Bank of India confirm the damage(हानि/आघात) caused(वजह/उत्पन्न करना) by high global oil prices in the last few months. India’s current account deficit(घाटा/कमी) (CAD) widened to 2.9% of gross domestic product (GDP) in the July-September quarter, a four-year high, under increasing(बढ़ाना/इज़ाफ़ा होना) pressure from the oil bill. This is in contrast(विरोध/विषमता) to the same quarter a year ago when the CAD was only 1.1% of GDP. The widening of the CAD was due to an increase in the trade deficit, which jumped to $50 billion in the September quarter as compared to $32.5 billion a year ago, due to a higher import(आयात) bill. The government, however, may not be too worried about the widening(चौड़ा) CAD figures as the major factor that was behind the phenomenon(घटना) has abated;(रोक-थाम करना) global oil prices have dropped sharply( तेजी से) since early October. Brent crude is down almost 30% from the high it reached in early October. So the size of the deficit is likely to come down in the quarter ending December. This is not to suggest that all is fine. As usual, medium to long-term risks to the external sector remain(बने हुए हैं।/टिकना). For one, there is the threat(खतरा/आशंका) of price volatility(अस्थिरता/परिवर्तनशीलता) faced by heavy importers of oil. Unless India manages to diversify(विविधता/भिन्न करना) its energy base by tapping into local sources of energy, this will remain a perennial threat to economic stability.

A widening current account deficit per se should not be a cause for worry as long as foreign capital inflows(अंतर्वाह/शाखा) into the economy are brisk(तेज ) enough( पर्याप्त ) to fund its huge import needs. The trouble(परेशानी ) arises(उत्पन्न होती है) when foreign inflows dry up and restrict the ability(योग्यता) to purchase(खरीदना) essential(आवश्यक ) imports. So as liquidity conditions continue to tighten across the world, India’s heavy import dependence(निर्भरता/अधीनता) is a cause(कारण/वजह) for concern(चिंता/मामला). Meanwhile, when Western central banks tighten their monetary policy, the RBI will be forced(मजबूर किया) to tighten its own policy stance in order to retain investment capital and defend(रक्षा करना/बचाना) the rupee. This will impact(प्रभाव) domestic economic growth negatively. Each time the external account has come under pressure, the government has simply tried to bring in piecemeal emergency measures( उपाय), such as a little opening up of the capital account or ill-advised(विचारपूर्ण/स्थिर) restrictions on imports. Such a policy obviously( स्पष्ट रूप से) manages to only kick the can down the road rather than bring a permanent(स्थायी/टिकाऊ) solution to the problem. In order to bring about any meaningful change, the government should also try implementing(पूर्ति करते हुए/परिपालन) proper structural reforms that can boost exports, thus helping fund imports through means other than capital inflows, and end the over-reliance on imported oil.

 

 

Important Vocabulary

1. Deficit(घाटा/कमी)
Synonyms: loss, shortfall, arrears, defalcation, default
Antonyms:abundance, adequacy, advantage, enough, perfection

2. Damage(हानि/आघात)
Synonyms: accident, blow, bruise, casualty, catastrophe
Antonyms: advantage, benefit, blessing, building, cleanliness

3. Increasing(बढ़ाना/इज़ाफ़ा होना)
Synonyms: developing, expanding, growing, rising, accumulating

4. Abated;(रोक-थाम करना)
Synonyms: decrease, diminish, dull, dwindle, ebb
Antonyms:advance, develop, enlarge, expand, extend

5. Volatility(अस्थिरता/परिवर्तनशीलता)
Synonyms: dryness, vaporization, vaporousness

6. Remain(बने हुए हैं।/टिकना).
Synonyms: continue, endure, go on, hover, last
Antonyms: cease, die, discontinue, go, leave

7. Contrast(विरोध/विषमता)
Synonyms: comparison, contradiction, disagreement, disparity, distinction
Antonyms: agreement, harmony, likeness, peace, sameness

8. Trouble(परेशानी )
Synonyms: anxiety, concern, danger, difficulty, dilemma
Antonyms: benefit, calm, calmness, contentment, ease

9. Ability(योग्यता)
Synonyms: capability, capacity, competence, intelligence, qualification
Antonyms: ignorance, impotence, inability, incapability, incapacity

10. Dependence(निर्भरता/अधीनता)
Synonyms: confidence, dependency, addiction, belief, craving
Antonyms: disbelief, distrust, indifference

11. Obviously( स्पष्ट रूप से)
Synonyms: apparently, certainly, clearly, definitely, evidently
Antonyms: doubtfully, dubiously, equivocally, indefinitely, questionably

12. Permanent(स्थायी/टिकाऊ)
Synonyms: durable, enduring, long-lasting, perpetual, stable
Antonyms: temporary, changing, ephemeral

13. Essential(आवश्यक )
Synonyms: crucial, fundamental, imperative, indispensable, main
Antonyms: auxiliary, extra, inessential, minor,needless

14. Brisk(तेज )
Synonyms: energetic, lively, quick, speedy, spry
Antonyms:idle, inactive, lazy, lethargic, lifeless

15. Measures( उपाय),
Synonyms: part, quota, allotment, allowance, amount
Antonyms: extreme, unimportance, whole, ignorance, inaction

16.Threat(खतरा/आशंका
Synonyms: blackmail, hazard, intimidation, menace, peril
Antonyms: certainty, safety, surety

 

 

 

Credit To The Hindu News Paper

The latest trade figures published by the Reserve Bank of India confirm the damage caused by high global oil prices in the last few months. India’s current account deficit (CAD) widened to 2.9% of gross domestic product (GDP) in the July-September quarter, a four-year high, under increasing pressure from the oil bill. This is in contrast to the same quarter a year ago when the CAD was only 1.1% of GDP. The widening of the CAD was due to an increase in the trade deficit, which jumped to $50 billion in the September quarter as compared to $32.5 billion a year ago, due to a higher import bill. The government, however, may not be too worried about the widening CAD figures as the major factor that was behind the phenomenon has abated; global oil prices have dropped sharply since early October. Brent crude is down almost 30% from the high it reached in early October. So the size of the deficit is likely to come down in the quarter ending December. This is not to suggest that all is fine. As usual, medium to long-term risks to the external sector remain. For one, there is the threat of price volatility faced by heavy importers of oil. Unless India manages to diversify its energy base by tapping into local sources of energy, this will remain a perennial threat to economic stability.

A widening current account deficit per se should not be a cause for worry as long as foreign capital inflows into the economy are brisk enough to fund its huge import needs. The trouble arises when foreign inflows dry up and restrict the ability to purchase essential imports. So as liquidity conditions continue to tighten across the world, India’s heavy import dependence is a cause for concern. Meanwhile, when Western central banks tighten their monetary policy, the RBI will be forced to tighten its own policy stance in order to retain investment capital and defend the rupee. This will impact domestic economic growth negatively. Each time the external account has come under pressure, the government has simply tried to bring in piecemeal emergency measures, such as a little opening up of the capital account or ill-advised restrictions on imports. Such a policy obviously manages to only kick the can down the road rather than bring a permanent solution to the problem. In order to bring about any meaningful change, the government should also try implementing proper structural reforms that can boost exports, thus helping fund imports through means other than capital inflows, and end the over-reliance on imported oil.

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