E-Paper
Wary govt keeping an eye on Brexit
NEW DELHI/MUMBAI: With the Brexit referendum just a week away, the government and the Reserve Bank of India (RBI) are assessing the possible fallouts of Britain
NEW DELHI/MUMBAI: With the Brexit referendum just a week away, the government and the Reserve Bank of India (RBI) are assessing the possible fallouts of Britain exiting the 28-member European Union.
“There are a number of risk factors that we routinely consider. We discussed, for example, what will happen with oil prices and turmoil in the Middle East. We discussed Brexit as well, along with the risk factors that India has,” minister of state for finance Jayant Sinha said on Thursday.
On the possible outcome of the referendum, Sinha said, “It (opinion polls) is showing that it will be a close call.”
Brexit is significant for India as it has significant trade — both goods and services — exposure to both the UK and the EU.
However, Sinha did not share if India is mulling any measures to insulate it from the impact of Brexit.
Apart from Brexit, the turmoil in West Asia and its implications on crude oil prices will affect India as it is a net importer of the commodity.
Though the recent surge in oil price has been a worry, Sinha had earlier said that the government’s fiscal maths and inflation calculations would not be impacted if the oil prices stay below the $60 mark.
India, which depends on imports to meet 80% of its oil needs, will have to spend Rs 9,126 crore ($1.36 billion) more every year for a dollar increase in the price of crude oil.
CAD NARROWS
The current account deficit (CAD) in the January-March period of 2015-16 narrowed to $0.3 billion, or to about 0.1% of the GDP. According to the RBI, CAD in the fourth quarter last year was $7.1 billion or 1.3% of GDP.
A declining CAD, which is the difference between dollar outflows and inflows, indicates that the gap between imports and exports is narrowing.
The contraction of the CAD was due to lower trade deficit of $24.8 billion, compared to $31.6 billion in the corresponding quarter last year.
According to ICRA, the current account deficit numbers are in line with expectations. “As compared to the net oil import savings of $29 billion in 2015-16, the merchandise trade deficit fell by $13 billion,” said ICRA.
