Besides, the large expansion in imports is also spurring vigorous export growth. In this sense, the merchandise trade deficit has acquired a growth leading dimension and is thus a positive feature of the Indian economy.
As the current account deficit widens, and we contribute to the unwinding of global imbalances at the margin, we have to give consideration to the sustainable magnitude of the current account deficit. This sustainability depends on the perceived stability of capital flows which, in turn, would be dependent on the assessment of growth prospects of the economy by foreign lenders and investors.