NRI Remittances Keep CAD Within Limits

The Reserve Bank has discarded the fears that India's current account deficit (CAD) would contribute to global imbalances, saying it is presently 1.7 percent despite a trade deficit of close to seven percent due to remittances from Indians working abroad.

Remittances provide an in-built cushion to balance of payments and help keep the cad within sustainable limits, RBI Governor Y V Reddy said, adding in this sense, the Indian economy has not contributed to the current global imbalances.

Addressing a gathering at the bank of Japan recently, he said: "the level of foreign exchange reserves is extremely modest compared to that of Japan, our reserves exceed each - a full years imports as well as the entire external debt."

On further reforms, Reddy said deregulation in the financial sector should be in tune with progress in the real and fiscal sectors.

"As we progress further in the reform process, the main focus would be to ensure that the pace of further deregulation and liberalisation remains consistent with the progress of reform in the real and fiscal sectors," he said. Reddy emphasised the need for proper implementation of the reforms in the banking sector and said the implementation should be in tune with national and global developments".

"In practice, within the given legal framework, priorities have to be appropriately set ensuring implementation of intended reforms in banking sector in tune with the evolving domestic and external developments," he said.