The Prime Minister's Economic Advisory Council Chairman C Rangarajan today said the widening current account deficit is manageable and the surging capital inflows will cushion the gap.
India's current account deficit, representing net flow of income out of the country barring capital movements, surged three fold to $13.7 billion in the April-June quarter over the same period last year, according to the Reserve Bank of India (RBI) data.
The former RBI governor also said food inflation will come down in the next few months on the back of a very good monsoon and the corrective measures taken by the central bank.
Rising for the fifth straight week, food inflation surged to 16.44 per cent for the week ending September 18.
While commenting on capital account deficit he sounded optimistic that it will remain at last year's level only. "Until the end of this August, the accretion to foreign exchange reserves has been minimal. This is despite capital flows being reasonably good. All these point to the fact that CAD this year may also be at last year's level," he said.
Rangarajan also said that there was no need for any regulatory intervention to contain the flow of foreign funds into the country as of now because it is only marginally higher than last year's level.
"The inflow has not reached a level that demands a corrective action," he said
Foreign institutional investors bought over $5.3 billion worth shares in September and $18.2 billion so far this year.
The former RBI governor was talking to newsmen after delivering the Second M Visvesvaraya Memorial Lecture on 'The current economic scene and policy options' at the World Trade Centre here.
