Measures taken to encourage foreign capital inflows will help finance CAD, says CEA
Says domestic economy remains resilient in first two months of FY27 despite West Asia crisis.
- Jun 5, 2026,
- Updated Jun 5, 2026 6:31 PM IST
The measures taken by the Reserve Bank of India and the Centre on Friday to encourage foreign capital will definitely help to finance the current account deficit, Chief Economic Advisor V Anantha Nageswaran said, adding that domestic demand continues to remain resilient despite the West Asia crisis. “The measures taken will definitely help finance the current account deficit,” the CEA told reporters, adding that it is difficult at present to estimate where it will settle at the end of the current financial year. He pointed out that India’s exports have continued to remain resilient despite the West Asia crisis. It has to be seen whether crude oil prices will follow the trend in the futures market. India’s current account deficit came in at 2% of the GDP in FY23 when oil prices had spiked in the first six months of the Russia-Ukraine war. The RBI and the finance ministry on Friday announced a slew of measures to attract foreign capital and ease pressure on the rupee including tax exemption from capital gains and interest from investments in government securities by foreign institutional investors. The CEA further said that it is too premature to discuss whether the government will have difficulty in meeting its borrowing targets this year. The Centre and the RBI on Friday took a number of measures to encourage foreign institutional investors to invest in government securities. Addressing reporters after the GDP estimates for the fourth quarter of FY26 and full fiscal year 2025-26 were released; the CEA said that the government will currently use the RBI’s estimates on growth and inflation for FY27. In the monetary policy review, the RBI has pegged GDP growth at 6.6% from its earlier forecast of 6.9% this fiscal. It has also raised the estimate for retail inflation this fiscal to 5.1%. The provisional estimates for GDP growth for FY26 reveal that the economy grew at a faster than anticipated pace of 7.7% although fourth quarter growth slowed down to 7.8% from over 8% expansion in the previous two quarters. Nageswaran however, said that the domestic economy remains resilient in the first two months of FY27, with insipient signs of stress. “Emerging global headwinds may gradually be transmitting into select segments of economic activity,” he said, adding that the forecast of a below average monsoon could also impact disposable incomes and private final consumption expenditure. He also underlined that continued pursuit of structural reforms during this period of global uncertainty will strengthen India’s economic foundations and position the country for sustained high growth in the years ahead. When asked what these structural reforms could be, he said that these would be on the lines of lowering the cost of business. The government may also take more measures to smoothen the impact of the West Asia crisis on the economy.
The measures taken by the Reserve Bank of India and the Centre on Friday to encourage foreign capital will definitely help to finance the current account deficit, Chief Economic Advisor V Anantha Nageswaran said, adding that domestic demand continues to remain resilient despite the West Asia crisis. “The measures taken will definitely help finance the current account deficit,” the CEA told reporters, adding that it is difficult at present to estimate where it will settle at the end of the current financial year. He pointed out that India’s exports have continued to remain resilient despite the West Asia crisis. It has to be seen whether crude oil prices will follow the trend in the futures market. India’s current account deficit came in at 2% of the GDP in FY23 when oil prices had spiked in the first six months of the Russia-Ukraine war. The RBI and the finance ministry on Friday announced a slew of measures to attract foreign capital and ease pressure on the rupee including tax exemption from capital gains and interest from investments in government securities by foreign institutional investors. The CEA further said that it is too premature to discuss whether the government will have difficulty in meeting its borrowing targets this year. The Centre and the RBI on Friday took a number of measures to encourage foreign institutional investors to invest in government securities. Addressing reporters after the GDP estimates for the fourth quarter of FY26 and full fiscal year 2025-26 were released; the CEA said that the government will currently use the RBI’s estimates on growth and inflation for FY27. In the monetary policy review, the RBI has pegged GDP growth at 6.6% from its earlier forecast of 6.9% this fiscal. It has also raised the estimate for retail inflation this fiscal to 5.1%. The provisional estimates for GDP growth for FY26 reveal that the economy grew at a faster than anticipated pace of 7.7% although fourth quarter growth slowed down to 7.8% from over 8% expansion in the previous two quarters. Nageswaran however, said that the domestic economy remains resilient in the first two months of FY27, with insipient signs of stress. “Emerging global headwinds may gradually be transmitting into select segments of economic activity,” he said, adding that the forecast of a below average monsoon could also impact disposable incomes and private final consumption expenditure. He also underlined that continued pursuit of structural reforms during this period of global uncertainty will strengthen India’s economic foundations and position the country for sustained high growth in the years ahead. When asked what these structural reforms could be, he said that these would be on the lines of lowering the cost of business. The government may also take more measures to smoothen the impact of the West Asia crisis on the economy.