India Current Account Deficit Explained: Why RBI’s FCNR Deposit Move Matters

India’s Current Account Deficit (CAD) continues to remain a key macroeconomic focus area for policymakers, not because the deficit is alarming in size, but because of concerns around the sustainability of capital inflows needed to finance it. While CAD levels remain below 2% of GDP and are considered manageable, the real challenge lies in ensuring consistent foreign capital inflows to support external balances. Recent policy attention on FCNR (Foreign Currency Non-Resident) deposits reflects efforts to strengthen these inflows and stabilize the external sector. However, experts argue that addressing only funding without curbing underlying excess demand may leave the structural issue unresolved. According to Mythili Bhusnurmath, Sr. Journalist & Former Editor, Financial Express, the current approach largely focuses on capital inflows while overlooking the broader imbalance in spending and external vulnerability, raising questions about long-term sustainability.