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Are we headed to the IMF?

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In the current year, the current account deficit is likely to be marginally lower, but it will be nowhere near a comfortable or safe zone. The share of short-term debt or external loans with maturities of less than one year has risen sharply to an unsustainably high level of around $140 billion, according to some estimates.

The import cover at a little less than seven months (calculated as the period for which the foreign exchange reserves would be able to finance imports) is much higher than the 2.5 months seen in 1990-91, when India experienced one of its worst balance of payments crises. But the deteriorating trend is clearly noticeable as evident from the manner in which the current import cover of about seven months has dwindled to less than half of what it was five years ago. Read More

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