Is current account surplus good or bad? Experts discuss

India posted a current account surplus in the April, May and June quarter. This is for the first time in seventeen years that India has posted a current account surplus. The negative from this is that it has come from a very sharp drop in imports because of economy’s inability to consume. However, the positive, some economists say, is that it makes it easy for government to run up a larger fiscal deficit. How was the fiscal deficit connected to current account surplus and more importantly will the current account surplus situation continue?

Sajjid Chinoy, Chief India Economist at JPMorgan, Samiran Chakraborty, Chief Economist – India at Citi and Ananth Narayan, professor of Finance at SP Jain Institute of Management and Research (SPJIMR) discussed in detail.

“We think the current account surplus will sustain at least for this fiscal year. This year we are quite certain that we will get a surplus of 1.5 percent of gross domestic product (GDP), next year if the economy recovers faster and households have more confidence about the future then you would expect them to mark savings rates down,” said Chinoy.