India: Selected Issues

International Monetary Fund

No 2014/058, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper uncovers the factors behind the unprecedented widening of India’s current account deficit in terms of the sectoral savings-investment balance. The unprecedented widening of India’s current account deficit in recent years is a symptom of underlying macroeconomic imbalances and structural weaknesses. Persistently high inflation has depressed real returns, prompting a surge in gold imports and a marked deterioration in household financial savings and the savings-investment balance. In turn, improvement in the public sector’s savings-investment balance was achieved through capital spending cuts, as subsidies remained high and fuel price adjustments lagged. Further efforts to increase financial savings would help reduce the current account deficit sustainably and boost growth.

Keywords: ISCR; CR; India; investment; product market; labor market rigidity; IMF staff calculation; investment slump; product market rigidity; food-price inflation shock; Inflation; Inclusive growth; Poverty reduction; Oil prices; Commodity markets; Global; South Asia (search for similar items in EconPapers)
Pages: 45
Date: 2014-02-20
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Citations: View citations in EconPapers (10)

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