The Prime Minister's Economic Advisory Council (PMEAC) Chairman , Dr C Rangarajan has said that to achieve and sustain higher growth rate, the country has to bring down its current account deficit (CAD) to around 2.5 per cent, besides containing inflation.
"In the first half of this fiscal our current account deficit (CAD) had hit a high of 3.7 per cent. But with good capital inflows of over $50 billion, this did not create a problem. But we cannot continue to have such high CAD and strive to sustain 9 per cent growth. We should bring down our CAD to 2.5 per cent or less next fiscal," Dr Rangarajan said at the Maharashtra Economic Summit last night here.
He further said, "The unexpectedly high rise in merchandise exports could do a lot to bring down trade deficit. Had the services exports also kept pace with the merchandise shipments this fiscal, trade deficit and the overall CAD would have been much lower. But I am hopeful this fiscal would end with a CAD under 3 per cent".
"So, we need to improve both our export segments very vibrant besides, bring down imports to bring down CAD to a comfortable level of 2.5 per cent for the next year," he said.
Listing major issues that may impede 9 per cent growth rate, he said high fiscal deficit and high CAD, poor investment and thus productivity of the farm sector, poor infrastructure and recurring wild price rises.
The former RBI governor also said he does not subscribe to the now fast gaining expert view that higher inflation is a corollary of high growth rates.