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Weakening rupee may further impact trade deficit, CAD: PHDCCI

Last Updated: Sunday, July 14, 2013 - 11:39

New Delhi: The continuous depreciation of the rupee is expected to further impact the country's trade and current account deficits, an industry body said on Sunday.

"India's trade deficit will exceed all possible limits if the rupee continues to slide. Besides, the inflow of international investments will recede further, hurting prospects of a growth revival," PHD Chamber of Commerce and Industry (PHDCCI) President Suman Jyoti Khaitan said in a statement.

The rupee touched an all-time low of 61.21 against the US dollar on July 8. It closed at a two-week high of 59.56 on Friday.

Khaitan said when the current account and fiscal deficits have already reached alarming levels, continuous rupee depreciation will add further anxiety for the government.

"The weak rupee performance vis-a-vis export behaviour varies during the good and the bad years. It is, in fact, the global demand condition which ultimately impacts the exports scenario from the country," he said.

The diversification of markets beyond the US and EU is helping exporters to increase shipments, he said.

"As of now, India's exports to Asia, Africa and Latin America put together constitute 62 percent of the country's total export basket. It is really a significant development," he added.

India's exports contracted 4.56 percent to USD 23.79 billion in June from a year earlier, declining for the second consecutive month. The trade deficit for 2012-13 was USD 190.91 billion.

The current account deficit in 2012-13 has been estimated at 4.8 percent of GDP, as against the RBI's comfort level of 2.5 percent. A high CAD puts pressure on the domestic currency and can expose the economy to a balance of payments problem.

The CAD represents the excess of imports of goods, services and transfers over their exports.


First Published: Sunday, July 14, 2013 - 11:39
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