{"id":211811,"date":"2022-10-26T20:15:46","date_gmt":"2022-10-26T14:45:46","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=211811"},"modified":"2022-10-26T20:16:03","modified_gmt":"2022-10-26T14:46:03","slug":"a-rate-and-rupee-strategy-could-restore-india-external-balances","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/a-rate-and-rupee-strategy-could-restore-india-external-balances\/","title":{"rendered":"A rate-and-rupee strategy could restore India external balances"},"content":{"rendered":"\n<p><strong>Source<\/strong>&#8211; The post is based on the article <strong>\u201cA rate-and-rupee strategy could restore India external balances\u201d <\/strong>published in the <strong>mint <\/strong>on <strong>26th October 2022<\/strong>.<\/p>\n<p><strong>Syllabus: <\/strong>GS3- Indian Economy<\/p>\n<p><strong>News- <\/strong>The article explains the current macroeconomic scenario in the country. It talks about the policy response to improve the external balances.<\/p>\n<h5><strong>What is the situation of external macroeconomics indicators?<\/strong><\/h5>\n<p>Foreign exchange reserves are $533 billion.<\/p>\n<p>The Rupee has weakened by 4.5% against the US Dollar since September.<\/p>\n<p>Trade and current account deficit are widening. CAD is likely to be 5% of GDP in the quarter ending September.<\/p>\n<p>External balances are facing pressures from higher commodity prices, high inflation, monetary policy tightening across the world.<\/p>\n<h5><strong>What is the internal economic scenario?<\/strong><\/h5>\n<p>Investment scenario is weak. Some investment indicators are rising. It does not signal rising capital expenditure. It is mostly replacement capital expenditure from the pandemic period.<\/p>\n<p>Saving rates have fallen. It has contributed to widening CAD. Higher public sector borrowing, lower household saving and lower bank deposits are responsible for low saving rates.<\/p>\n<h5><strong>What can be the policy repose?<\/strong><\/h5>\n<p><strong>Policy rate hikes<\/strong>&#8211; It may check the inflation, incentive saving and discourage the household borrowings. But it could slow down income growth.<\/p>\n<p><strong>Increase public savings<\/strong>&#8211; It can lead to expenditure cuts. It will be negative for GDP growth and income.<\/p>\n<p><strong>Currency depreciation<\/strong>&#8211; It will make exports more competitive, imports more expensive and lower trade deficit.<\/p>\n<p><strong>A combination of higher interest rates and weaker Rupee is the optimal response<\/strong>. In September RBI moved to a two-pronged strategy of higher rates and weaker Rupee.<\/p>\n<p>But there are challenges to this path. Real deposit rates are negative and trade weighted REER has not weakened since May this year.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source&#8211; The post is based on the article \u201cA rate-and-rupee strategy could restore India external balances\u201d published in the mint on 26th October 2022. Syllabus: GS3- Indian Economy News- The article explains the current macroeconomic scenario in the country. It talks about the policy response to improve the external balances. What is the situation of&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/a-rate-and-rupee-strategy-could-restore-india-external-balances\/\">Continue reading <span class=\"screen-reader-text\">A rate-and-rupee strategy could restore India external balances<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,11126],"class_list":["post-211811","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-the-mint","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704924503},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/211811","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=211811"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/211811\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=211811"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=211811"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=211811"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}