India's External Account
CAD has shrunk from 4.8% to 0.7% in FY17. FDI & foreign exchange reserves have surged. As a result, FDI now fully covers the current account deficit. FDI also brings prospects of more growth, jobs & know-how.

A few threats to CAD loom. Oil demand is growing at a fast clip and will push up net imports in the coming years. Restrictions on migrant workers will reduce worker's remittances, and these comprise 60% of total remittances. US & Europe's trade policies are creating vulnerabilities in many sectors, e.g. pharma, agriculture & IT. Protectionism is affecting exports of telecom, computer and information services, which contribute about 48% to services exports.

Summary
❡ India’s balance of payments account is expected to remain healthy with CAD at moderate levels and adequately financed. While external risks can push up CAD mildly, the high capital inflows, particularly FDI inflows is a source of comfort. India will not be so vulnerable to hot money or portfolio investments. ❡