Why consumption must slow down

GDP growth may get hurt too as a weaker currency and higher interest rates drag down consumption to bridge balance of payments deficit

Imagine a household that consumes Rs 100 but only earns Rs 80, and bridges the gap of Rs 20 by borrowing money or selling its assets. If for some reason its consumption grows to Rs 110 (say, for the purchase of a new cellphone or an increase in the price of some items), but income stays unchanged, unless it can get an additional Rs 10 of funding, the consumption is unsustainable. That, in essence, is the balance of payments deficit that India currently suffers: The excess of consumption over production, that is, the current account deficit (CAD) is now well