Durable inflows need of the hour

Raising concern over the widening current account deficit, Prime Minister Manmohan Singh on Wednesday said the country would ensure foreign inflows in the next two years to fund the gap, rather than using foreign exchange reserves. While India's forex reserves came down in the previous two financial years, after touching a high of $304 billion in 2010-11, the Reserve Bank of India had earlier hinted it would be cautious in using the reserves to contain the volatile rupee. Data also show portfolio inflows dominated in the last few years rather than foreign direct investment, highlighting the need for policies to encourage flows of a durable nature. (Click on graphics)