The merchandise trade deficit is currently close to 7.0 per cent of GDP; however, the current account deficit is under 1.5 per cent of GDP, mainly due to receipts from services and the steady support from remittances from Indians working abroad  Prospects for the Indian economy In terms of immediate prospects, overall, we expect the real GDP growth in 2007-08 to be around 8.5 per cent, assuming no further escalation in international crude prices and barring domestic or external shocks.
For the year 2007-08, the Reserve Bank's policy endeavour would be to contain inflation close to 5.0 per cent. In the medium term, in recognition of India’s evolving integration with the global economy and societal preferences, the resolve, going forward, is to condition policy and expectations for inflation in the range of 4.0-4.5 per cent.