India’s large and troubling CAD

India’s current account deficit (CAD) in the July-September quarter turned out to be far worse than anticipated, a record 5.4% of GDP. Even during the quarters following the sharp depreciation of the rupee since August 2011, the deficit had remained between 3.9% and 4.5% of GDP. (The quarters post the financial crisis of 2008 are not valid comparators since the prices of commodities, particularly crude, had come down sharply.)

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