IMF wants India to focus on FDI, cautions against relying on global markets

Cautions against relying on global financial markets to its finance current account deficit

The International Monetary Fund (IMF) has cautioned India it should not rely on global financial markets to finance its current account deficit (CAD) when it goes above 3 per cent of gross domestic product (GDP). The Fund basically advised India to rely more on stable sources of foreign inflow — foreign direct investment (FDI).

The advice came amid expectations that India's CAD will rise to 2.5 per cent of GDP in the first quarter of 2018-19.

On the contentious issue of the rupee’s value, the Fund in its latest external report has noted the real effective exchange rate (REER) is