A new report by Moody's Investors Service has said that the Narendra Modi government's policies, like liberalised foreign direct investment and 'Make in India', have reduced India's vulnerability to the global economic crisis, reported PTI. Net FDI inflows into India were at an all-time high in January 2016. In its report, the ratings agency said, "We do not expect a significant renewed widening of India's current account deficit [CAD]. Our assumption that commodity prices will remain low in 2016 and 2017 supports this view, while FDI inflows are likely to climb in response to government measures." The current account deficit of a country shoots up when it imports more than it exports.
The report further said India's need for financing from external sources has reduced in the last three years, and cited it as "credit positive" for the country. "Against the backdrop of subdued global economic activity in particular in the Gulf, the origin of more than half of remittances to India remittance inflows could weaken further in the coming months," it added.
The agency also observed that moderate energy and gold imports are keeping the trade deficit in check. It expects the new excise duty imposed on gold to contribute to the trend. The report added that development of industrial corridors, manufacturing zones, and smart cities will further bolster investment inflows.