This refers to the report "PM's advisors differ with finance ministry" (September 14). Now that the current account deficit (CAD) has risen to 4.8 per cent of the gross domestic product, the policymakers have been forced to identify the sources of its funding. Unfortunately, there is some misreading of the CAD itself. Many have interpreted it as the excess of imports over imports. That would only be a textbook explanation of the phenomenon. A major portion of the CAD has arisen due to over leveraged position (read huge external commercial borrowing) of many companies. Companies have not been able to service the piling up of the debt due to sluggish sale, squeezed margins and poor cash flow. This is also clear from the rising restructured portfolio of lending banks. Adding to this is the fall in foreign inflows due to the perceived escalation in country risk.
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K V Rao, Bangalore
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 · E-mail: letters@bsmail.in
All letters must have a postal address and telephone number