In this context, I make a few suggestions. First, the current level of CAD is far above the level sustainable for India.
As per estimates, at a nominal growth rate of about 13 per cent, the sustainable current account to GDP ratio is 2.3 per cent (Rangarajan, 2012).5 Reserve Bank’s own research shows that economy can sustain CAD of about 2.5 per cent of GDP under a scenario of slower growth (RBI, 2012).6 A slowing global economy and protracted high levels of unemployment in advanced economies make it difficult to boost services exports in the short run.