The Tyranny of Balance of payments
Read full article Abstract: Import barriers and capital inflows will not make the current account deficit go away India's current account deficit (CAD) has ballooned, reaching 4.6% of the Gross Domestic Product (GDP) in 2011-12. While the latest Economic Survey advises cutting gold and oil imports, the budget speech emphatically points to larger capital inflows as the solution. Both the survey and the speech couldn't be more wrong. Restricting gold or oil imports will not change the total imports or the CAD. And bringing more foreign capital will increase , not reduce the latter.
Continue reading...